Andy Morris, Risk Business Solutions Consultant, ACI Worldwide
The latest figures from the Financial Fraud Action UK have revealed some interesting insights about the current trends. Notably, plastic fraud has seen a considerable incline, up 16 per cent from last year.
If we accept these are the most up-to-date and accurate figures for card fraud, then it raises some thought-provoking questions for our North American counterparts who are in the process of rolling out EMV systems. For years, the UK has embraced chip and pin, a payment method that most of us now willingly use. But with fraud in this guise rising, why should the US introduce it? Is it a silver bullet?
Well to be quite honest, the 16 per cent increase would have been much higher had the UK not introduced chip and pin in 2006. What we are seeing now is a metamorphosis of the type of fraud taking place: card not present, fraud taking place whilst abroad, and low-tech distraction fraud techniques.
Chip and pin has not increased fraud; it’s simply changed it. But the good news is that what it has changed into is theoretically easier for the average person to ward against. Continuing to educate consumers is key in combating this problem. Reminding people to be security conscious is common sense, but it’s easy for people to forget or to be lax when protecting PIN numbers, being careful what websites they navigate to and cookies they take along the way, and of course, deleting bogus emails asking for sensitive information. When you look at the advice to battle fraud, you see how uncomplicated it is. But the 16 per cent increase shows it’s effective. So whilst these points may sound like spoon-feeding obvious advice, sometimes it’s easy to lose sight of the wood for the trees.
Checking cheques works
Whilst plastic fraud can be prevented with some pretty simple tactics, it’s interesting to see a much older form of payment; paying by cheques has seen a marked decrease in fraud. Ok, so a lot less of us are using cheques, but it is still a high volume payment type in the UK.
Much like we will always have a need for high street banks, we will also see the cheque continue to be used. There was a time in the British Banking Association days when cheque fraud losses were being reported at upwards of £80 million. According to the latest figures, that’s now fallen to £27 million- a fall of 22 per cent in a calendar year. Whilst the volume decrease is part of the reason for this, it’s undeniable that some of the new hi-tech security methods brought in have helped to fight fraud.
New technologies such as signature verification and transaction monitoring solutions have taken what is a low-tech payment form and made it more robust in the modern world. Fraudsters are turning away in droves from targeting cheques. A combination of a lower volume of these transactions, the fact they have potentially fallen out of favour with fraudsters, and the significant increase in security technology means if you are a fraudster, suddenly cheque fraud is no longer the appealing opportunity it once was (at least in the UK).
Fraudsters beware, technology is closing in
If you are working in the US and espousing the virtues of EMV, do not be put off by the increase in plastic fraud. Yes, it has increased, but a wider analysis shows that the increase has come with methods that are combatable. As consumer awareness of these cheap tricks increases, fraudsters are going to find the ground beneath their feet quickly disappearing.
Equally, more technology adoption in older payment forms is winning the technological battle against fraudsters.
It would be naive to say technology will combat fraud entirely, and in some cases it may provide new opportunities for criminals, but their usage of low-tech methods for defrauding consumers might suggest they are trailing banks and institutions in the technological arms race…then again, it might not.