| Fighting the card fraudsters |
|
|
| Written by Jonquil Lowe, 2005 | |
|
Page 1 of 2 Plastic cards are used by UK consumers in half a billion transactions a year, but fraud is a big problem. Jonquil Lowe outlines how the industry is fighting fraud and what you can do. Every eight seconds in the UK, a fraudulent debit or credit card transaction takes place. Consumers are largely protected from any loss (see box "Consumer protection"), so card issuers and retailers had to foot most of the £412 million bill for fraud in 2003. Not surprisingly, they are constantly looking for ways to fight the fraudsters. The latest weapon in the battle is chip and PIN.Card fraudTop of the poll (see Figure 1) are frauds where the criminal does not have a card but uses stolen details to make transactions by mail, phone, fax or Internet. The card details might be stolen from discarded receipts or copied from your card without your knowledge.Next most common is criminals using fake cards loaded with real card details stolen usually by 'skimming'. This happens when a dishonest employee processing a genuine transaction, in just a second or two, also swipes your card through a small machine that copies details from the card's magnetic strip. The employee then typically sells the copy to fraudsters who produce the fake cards. The first you know that you are a victim is when rogue transactions start to appear on your monthly statement. The third most popular fraud is misuse of lost and stolen cards, which mainly takes place before the card is reported missing. Chip and PINIt is cheap and relatively straight-forward for criminals to copy the details carried on a magnetic strip, and easy for criminals to forge a signature to pass themselves off as genuine cardholders, which is why the use of fake cards accounts for so much card fraud. Chip and PIN technology aims to tackle this. By the end of 2004, three-quarters of the UK's 42 million cardholders had received new debit and credit cards carrying a 'smart' chip. If you haven't received a new card yet, you should do during the course of 2005, usually as your existing card expires.When you shop, you enter your card into a reader and, instead of signing a transaction slip, you key your PIN into a pad. The chip's memory contains the information needed to verify the transaction and, because it has processing capabilities, the chip may also be actively involved in authorising the transaction. Chip cards are more expensive to fake and the requirement to key in a PIN makes it much harder for criminals to masquerade as the true cardholders. The new cards will continue to carry a magnetic strip as well so you can still use it in places that are not equipped to process chip transactions - including many outlets abroad. Chip and PIN is a worldwide initiative, but the UK is one of the first countries to roll out the technology. France has been using a chip-based system for the last ten years and has seen a huge drop in fraud involving fake cards, but the French system is different so, even with a chip card, you are likely to have to continue signing for French transactions for some time to come. Protect yourselfAlthough chip and PIN should cut certain types of fraud dramatically, it is still very important that you protect your cards and PINs. Precautions to take include:
|
