UK card fraud falling thanks to better transaction checks

The UK’s adoption of security technologies including chip & PIN has resulted in marked drops in credit and debit card fraud in the last four years and set an example other European countries should follow, analytics firm FICO has reported.

Using information from Euromonitor International, the peak year for all types of UK plastic fraud was 2008 when card not present (CNP) losses reached around £320 million in the UK, ahead of card counterfeiting at around £170 million.

Since then, losses have fallen steeply and consistently to just over £200 million from CNP in 2011 and £50 million for counterfeiting. Since 2006, the UK’s share of European plastic fraud has dropped from 45 percent to 29 percent last year.

Interestingly, despite banks’ promotion of identity theft fraud protection, card losses from this type of crime have remained relatively low since 2006 at a peak of around £25 million, falling slightly since then.

In European countries such as France and Germany, the picture is more mixed with card not present fraud in particular continuing to rise beyond 2008 before levelling out at higher levels.

France’s CNP number in 2011 was around 160 million euros (at 2011 exchange rates roughly £145 million), while Germany’s has risen to 80 million (around £70 million).

Despite the UK’s falling levels it is clear that fraud levels in the country had reached extraordinary levels in the last decade for a country of 62 million people, many times higher than Germany, a country with a population of 81 million.

This suggests that banks were slow to get on top of the issue until the credit crunch focussed minds on the unacceptable level of UK losses. Despite investment, the UK remains a card fraud hotspot.

The effect chip & PIN has had on overall fraud is also open to some interpretation. First introduced in 2003, fraud levels continued to rise until 2008 which hints that other anti-fraud measures (such as transaction checking and verification) have probably had the biggest effect.

More likely, Chip & PIN caused a change in the type of fraud since when banks have invested in the sort of transaction checking and modelling that was non-existent a decade ago when the problem first emerged.

“Criminals have shifted their focus to new opportunities within Europe, as anti-fraud measures in the UK become stricter,” said FICO’s fraud chief, Martin Warwick.

“The rise of chip and PIN protection has spurred migration to CNP fraud, where criminals make use of internet channels that carry less risk than attempting fraudulent purchase in a shop.”

“Response to the CNP threat has been slower but increased adoption of the 3D Secure protocol — which is used in Verified by Visa and SecureCode by MasterCard for online transactions, and which American Express is now joining — should make a difference,” he said.

FICO has published an interactive inforgraphic charting European card fraud.

This story, "UK card fraud falling thanks to better transaction checks" was originally published by

Copyright © 2012 IDG Communications, Inc.

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