THE BATTLE AGAINST CREDIT CARD FRAUD

I recently had my wallet stolen together with several credit cards and my driving license disclosing my date of birth and home address. It suddenly dawned on me how easy it would be for a thief to assume my identity and use my credit cards or apply for other cards. Conveniently for me I noticed the theft very quickly and reported the incident to my card suppliers so as to prevent the thieves from using my cards.

But what if I hadn’t?

Losses of £95.3 m for June 2006 as a result of CNP

I would have been exposed to on line card transactions without my permission. These types of transactions are known as ‘Cardholder Not Present’ (CNP) and are proving to be the fastest growing form of credit card fraud in Britain, as criminals obtain card details, then make fraudulent remote purchases by phone, mail order and the internet/

Indeed APACS the UK payments association reported losses of £95.3 m for June 2006 as a result of CNP, that’s an increase of 5% on the previous year. However overall APACS showed that as the result of CHIP and PIN credit card fraud fell by 5%.

Often it’s the retailers that suffer over disputed transactions

CNP affects both individual victims and retailers alike. However while card users become complacent because of cover offered by their card supplier, on balance it’s the retailers that suffer over disputed transactions. As a result retailers are likely to increase their prices to accommodate for CNP losses.

It is my view that Chip and Pin should be offered for CNP transactions through secure websites and automated telephone systems where the customer can dial their pin number in order to complete the transaction. Alternatively passwords unique to the cardholder that appear once the telephone operator inserts the card number, thereby requesting the cardholder for confirmation of the same so as to complete the transaction. An on-line version of this is currently offered by Visa, whereby the card holder inserts their password and date of birth to complete the transaction - however, registration to this scheme is optional, and unfortunatley not proving to be too popular.

Both of these schemes may not be welcomed by some retailers because the time in which to complete a transaction may be delayed longer than usual, and as a result reduce sales turnover. However while customers become more and more complacent and CNP fraud increases retailers may find that it’s the only way to combat a growing problem that eats into their profit margins.

Carlo Pegna ICM 2007 Credit Professional of the Year

For expert advice on combatting Credit Card fraud contact Carlo Pegna on 01992 890391 or e-mail carlo.pegna@mastercollections.co.uk.

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© 2007 Master Collections Ltd