The banking industry’s fraud-protection initiatives are having an effect in the United Kingdom, as fraud losses related to payment cards, checks and online banking decreased last year, according to recent research by the UK Payments Council.
Total fraud losses on cards fell 16.9%, to £365.4 million (US$590 million or 425 million euros) from £440 million in 2009, the lowest yearly total for card fraud since 2000, the council noted in a report released March 9.
The effective initiatives banks are using to combat card fraud include educating merchants about protecting their chip-and-PIN equipment, and increasing merchant and consumer adoption of such online fraud-prevention initiatives as Verified by Visa and MasterCard SecureCode, the council noted in a news release.
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 banking industry also experienced a 3% drop in check-fraud losses, to £28.9 million last year from £29.8 million in 2009 (see chart). The industry most likely will see a more-dramatic drop as consumers continue to decrease their check use over the next few years, Matt Simester, a director of Auriemma Consulting Group in the UK, tells PaymentsSource.
Online-banking fraud losses totaled £46.7 million, down 21.8% from £59.7 million. The council attributes the drop to consumers learning to protect their computers with the latest antivirus software and to banks’ use of fraud-detection software.
Despite the losses in card, online banking and check fraud, phone-banking fraud increased by 5%, to £12.7 million from £12.1 million. Much of the loss involved consumers being tricked into disclosing their personal security details through cold calls or fake e-mails, according to the council.
Meanwhile, losses associated with online, mail-order and telephone-order fraud in the UK dropped for the second consecutive year, according to Retail Decisions Ltd., a London-based card fraud-prevention and payment-processing company.
Fraud losses in all three card-not-present transaction types combined fell by 10.2%, to £239 million last year from £266 million in 2009. Such fraud also has decreased significantly since hitting a peak of £328 million in 2008, Retail Decisions said in March 8 news release. The company did not list the totals for 2009 or 2010.
Retail Decisions attributes the drop in card-not-present fraud to an increase in merchant transaction screening and expects the value of such fraud to drop an additional 5% through the remainder of 2011. The company predicts card-not-present losses will increase in 2012 because of fraud attempts tied to the Olympics in London.
The fraud losses across the board in the banking and retail industry demonstrate the amount of focus the UK payment’s industry has placed on fraud-prevention technology, Simester says. “All the hard work is paying off and continues as a trend, which is good,” he says.
And now that effective technology and initiatives are in place, banks and merchants should focus on ensuring that when fraud issues arise that they handle the situation so customers have a positive experience, Simester notes.
Because fraud is decreasing, consumers should gain more confidence in using their cards, Simester says. “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 adds.
Indeed, as crooks’ knowledge of the latest fraud-prevention technology evolves, many of the industry’s customer-service offerings still have a ways to go to keep up (
