British banks try hand delivery to cut credit card losses.

British Banks Try Hand Delivery to Cut Credit Card Losses

LONDON - Hoping to reduce the British credit card industry's fraud losses, estimated at $200 million a year, many banks and other issuers are using private couriers to deliver cards to customers.

While industry officials say the new method is expensive, they expect to recoup the extra expenditure by sharply reduced rates of fraud involving cards that were mailed.

The strategy is designed to thwart criminals who steal credit cards from post office mail drops. This type of fraud is on the rise both in Britain and the United States, according to bank card executives.

Cost is $170,000

Diners Club International, which has issued some 250,000 cards in Britain, is the latest company to test the special delivery service.

It will cost $170,000 a year, according to Dick Parker, Diners' fraud investigation manager.

In the long term, though, the Citicorp unit will "save money by virtually eliminating losses through fraudulent use of our cards," he says.

More than 750,000 credit and charge cards issued in Britain each year never reach their intended destination, according to the Association of Payment Clearing Services. A relatively small number of those cards fall into the hands of wrongdoers, but the cost to the industry is a hefty $10,000 a card.

Rapid Growth in Fraud

That has helped to make card fraud one of the fastest-growing financial crimes in Britain, where 80 million cards of all types are in circulation.

The industry group is the focus of a coordinated effort by card issuers to fight fraud amid evidence that organized crime has moved into plastic credit as a profitable new venture.

"A number of companies are choosing to use hand delivery or alternative issuing methods rather than the public postal services," says Richard Tyson-Davis, a spokesman for the Association of Payment Clearing Services.

The card industry has two complaints about the postal system: frequent but unintentional delivery mistakes, and deliberate fraud involving postal employees.

Problem Linked to Holidays

The card companies say the problem is particularly prevalent at peak mail times, such as Christmas, when the postal system employs large numbers of temporary workers.

Diners Club is using Securicor, a private security firm already involved in payroll and bank cash deliveries, for its card deliveries to defeat mail fraud in high-risk areas such as London, according to Mr. Parker.

In an interview, he said Securicor personnel are asked to carry out basic checks, such as ensuring that the delivery point is not a derelict building.

"We also ask them to be careful about multi-occupancy locations like apartments," he said.

Hand delivery is not carried out in a "bureaucratic way," Mr. Parker said, and Diners does not insist on receiving signatures of users as confirmations.

"If this was the case, 50% of our cards would never be delivered, particularly as they are sent out to customers during hours when they would normally be at work," he explained. [Tabular Data Omitted]

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