Chip and Pin drives fraudsters online

Chip and Pin has reduced credit and debit card fraud but has forced many criminals online

The introduction of chip and Pin has reduced credit and debit card fraud by 13 per cent but has forced many criminals online, according to the Association for Payment Clearing Services (Apacs).

Card fraud totalled £219.4m during the first six months of 2005, down from £252.6m during the same period in 2004.

Purchases using chip and Pin are verified with a four-digit code stored securely in a microchip on the card, making it harder for criminals to copy.

The biggest area of improvement was a 37 per cent reduction in losses on cards that went missing. Counterfeit card fraud fell by 31 per cent, fraud on lost or stolen cards dropped by 27 per cent, and identity theft on payment cards was down by 16 per cent.

Apacs said that these reductions were mainly due to the introduction of chip and Pin, but added that so-called 'card not present' fraud, such as when a card is used to buy something over the internet, telephone or through mail order, is still rising. Losses were up 29 per cent to £90.6m, £58m of which was internet card fraud.

The banking industry body said that 117 million of the country's 140 million cards have been upgraded to chip and Pin since the programme began in late 2003.

But research by Which? magazine has revealed that the public is somewhat lax on basic security measures.

One fifth do not check their credit card statements properly, and a similar proportion would give their account details to a stranger on the phone if that person claimed to be phoning from their bank or credit card company.

Mark Herber, founder of managed service provider Inty, said: "It is great that chip and Pin is helping to reduce fraud, but it is clear that criminals are now turning to the internet.

"Consumers really need to watch out for phishing scams and guard their PCs from viruses and Trojans."

Meanwhile Nathan Jackson, managing director of secure payment firm CyberSource, believes that the growth of online fraud is overplayed.

"With the online retail industry growing so rapidly some increase in the level of fraud is inevitable," he said.

"Responsible retailers have taken measures to manage the threat, and 84 per cent of those we talked to for our 2005 Fraud Report saw no increase in fraud as a proportion of revenue. Sixty-five per cent saw no change or even a fall in losses."