The banking industry's fraud protection initiatives are having an effect in the U.K., as fraud losses related to payment cards, checks and online banking decreased last year, according to research by the U.K. Payments Council.
Total fraud losses on cards fell 16.9%, to $592 million, from 2009, the lowest yearly total for card fraud since 2000, the council said in a report released Wednesday.
The initiatives banks are using include educating merchants about protecting their chip-and-PIN acceptance equipment and increasing merchant and consumer adoption of such online fraud prevention programs as Verified by Visa and MasterCard SecureCode, the council said.
Verified by Visa and MasterCard SecureCode use a "3-D Secure" protocol and require cardholders to register their cards with the brands to get a secure password to use with online transactions. Merchants also must use the 3-D Secure software on their e-commerce sites. Merchants that accurately process and verify transactions through either service face no charge-back risk.
Banks also have increased the sharing of fraud data and intelligence, the use of fraud detection services and chip-and-PIN card acceptance abroad, according to the council.
The U.K. banking industry also had a 3% drop in check fraud losses, to $47 million. The industry most likely will see a more-dramatic drop as consumers continue to decrease their check use, said Matt Simester, a director of Auriemma Consulting Group in the U.K.
Online banking fraud losses totaled $76 million, down 21.8%, from 2009. The council attributed the drop to consumers learning to protect their computers with the latest antivirus software and banks' use of fraud detection software.
Despite the declines in card, online banking and check fraud, phone banking fraud increased by 5%, to $21 million. Much of the loss involved consumers being tricked into disclosing personal security details through cold calls or fake e-mails, the council said.
Meanwhile, losses associated with online, mail-order and telephone-order fraud in the U.K. dropped for the second consecutive year, according to Retail Decisions Ltd., a card fraud prevention and payment processing company in London.
Fraud losses in all three card-not-present transaction types combined fell by 10.2%, to $388 million, last year. Such fraud also has decreased significantly since hitting a peak of $532 million in 2008, Retail Decisions said Tuesday. The company did not list the totals for each transaction type for 2009 or 2010.
Retail Decisions attributed the drop in card-not-present fraud to an increase in merchant transaction screening, and expects the value of such fraud to fall an additional 5% through the remainder of 2011. It predicts card-not-present losses will increase in 2012 because of fraud attempts tied to the Olympics in London.
Because fraud is decreasing, consumers should gain more confidence in using their cards, Simester said. "But it is harder for consumers to reclaim value when they have been hit by fraud and have go through several hurdles before they get refunded," he said.
