Uk regional card fraud 2009

UK Regional Card FraudA CPP white paper

March 2009

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UK Regional Card Fraud March 2009

1.1 Foreword

1.� Industry Facts

1.3 Research methodology

1.4 Key Findings - Payment fraud is a common problem

- London is the worst city for fraud in the UK

- We rely on our banks to tell us we have been defrauded

- Online fraud is a big problem

- The average sum fraudulently taken is £650

- Banks should be responsible for preventing fraud

1.5 Conclusion

1.6 Avoiding Card Fraud

1.7 Further Information

1.8 About CPP

Contents

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1.1 Foreword

Payment fraud continues to rise across the UK. With the introduction of Chip and PIN in February 2005, payment fraud declined by 13% to just over £439m, the first annual fall since 2003. Since then payment fraud has steadily increased and now stands at £609.9m driven by transactions without Chip and PIN protection. Because Chip and PIN has been so effective at reducing fraud at point-of-sale, or retailer fraud, criminals have focused their activities elsewhere, and in particular, card-not-present (CNP) fraud, which now accounts for over half (54 per cent) of total losses. CNP fraud commonly involves the theft of genuine card details in the real world that are then used to make a purchase over the internet, by phone, or by mail order.

There is also evidence that the recession is changing the way fraudsters operate which will be discussed later on in this report.

There is evidence that the

recession is changing

the way fraudsters operate

Introduction

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1.� Industry Facts

Payment fraud continues to increase despite the best efforts of the industry to control it.

- Card fraud losses totalled £609.9m in 2008 up 14 per cent on 2007

- CNP fraud (specifically internet, phone and mail order fraud) accounts for over half of total payment fraud at £328.4m up 13 per cent on 2007

- Fraud abroad committed by criminals using stolen UK card details in countries yet to upgrade to Chip and PIN totalled £207.6m up 11% and double since 2006

- Online banking fraud losses reported the biggest increase of 132 per cent to £52.5m, up from £22.6m in 2007. The growth has been driven by the increase in phishing attacks and by malware that captures people’s online banking information

- Identity Card theft losses are also another area of growth, up 39 per cent to £47.4m. This is due to the increase in account takeover, whereby fraudsters target people to take over their accounts and cards. The restriction in new credit due the banking crisis is forcing many fraudsters to target existing accountholders where there is a guaranteed financial return Source: APACS – the UK’s payments association 2008

There is no doubt that card fraud continues to be a problem and will get worse over the coming years. We predict that fraud will continue its upwards trajectory driven by transactions without Chip and PIN protection until a mass market solution is found that addresses CNP fraud.

There are of course, some industry initiatives that are already making a difference. In particular the industry must continue to encourage cardholders and more retailers to sign up to MasterCard SecureCode and Verified by Visa – secure online payment systems that help prevent online shopping fraud.

In addition, education lies at the heart of the solution. Consumers must be persuaded to change their behaviour when it comes to looking after their payment details, how they use their payment cards and how they monitor their financial affairs. Industry initiatives to reduce card fraud must be accompanied by a responsible consumer behaviour. Although this report does not attribute blame to the individual, we recognise that in some cases they can be the weakest link in the protection chain.

Although the Banking Code protects consumers from financial loses as long as they have not acted without reasonable care, all cardholders are liable for the first £50. Critically, however, with CNP fraud increasing, it may become harder for consumers to prove they have not acted without unreasonable care. This will be an area to monitor and it will be interesting to see if the Banking code changes in any way to accommodate this trend.

There is no doubt that card

fraud continues

to be a problem

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1.3 Research Methodology

CPP commissioned research in February 2009 to establish how widespread card fraud is across the UK. It looked at how many cardholders have ever fallen victim and the different ways they fell victim to payment fraud. The aim was to quantify the level of card fraud across the country and the extent to which UK cities have been affected.

A representative sample of 1,679 UK credit and debit card holders aged 18+ were questioned by Tickbox.net/Opinion Matters.

The report also draws on figures from APACS, the UK’s payment association.

1.4 Key Findings

Payment fraud is a common problem

26 per cent of consumers claim to have been a victim of card fraud in the past. This headline figure has risen by 5 per cent from 21 per cent in 2007. This peaks at 30% of consumers aged 55+. Women generally purport to have been defrauded more (30%) than men (24%).

Q: Have you ever been a victim of card fraud? (by age)

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London is the worst city for fraud in the UK

London tops the regional table for card fraud with 38 per cent of Londoners claiming to have been a victim in the past. This is closely followed by Cardiff (34%), Glasgow (31%), Manchester (29%) and Brighton (27%).

Liverpool (10%), Nottingham (12%) and Belfast (13%) are the cities least affected.

Q: Have you ever been a victim of card fraud? (by city)

London is the worst

city for fraud in the UK

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We rely on our banks tell us we have been defrauded

42 per cent of victims found out they had been a victim of card fraud once told by their bank. 40 per cent discovered fraud by reading bank statements and identifying transactions that they did not recognise.

Interestingly consumers aged 16-24 are most likely to identify fraudulent transactions by reading their bank statements, whereas consumers aged 55+ are least likely to identify fraud through their bank statements. One explanation for this may be that 16-24 consumers are more likely to bank online and regularly check their accounts on a daily or weekly basis as opposed to the older demographic relying on monthly paper statements delivered by the post.

Those aged 45-54 and 55+ are most likely to be notified of fraud via their bank (50%) against 16-24 who are least likely (9%)

Q: How did you first find out that you had been a victim of card fraud?

Consumers aged 16-24 are most likely to identify

fraudulent transactions by reading their bank statements

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Online fraud is a big problem

Complementing the APACS payment fraud statistics (see below), 39 per cent of victims attribute fraud to online, 21 per cent to card cloning from a cash point or Chip and PIN device and 8 per cent to losing or having their payment cards stolen. Nearly a third of consumers (27%) have no idea how they were defrauded.

As you might expect 16-24 are most likely (55%) to be defrauded online – this is no doubt due to their propensity to shop online and use a wide spectrum of online sites including social networking forums. It is interesting to note that 16-24 are more aware of how they have been defrauded whereas a third (33%) of older consumer do not understand how they have been defrauded.

In 2008, online banking fraud losses stood at £52.5m up 132 per cent and fraud from counterfeit skimmed and cloned fraud was £169.8m up 18 per cent. Fraud from lost and stolen cards stood at £54.1m down slightly at 4 per cent.

Q: Which one of the following best describes how you became a victim of credit / debit card fraud? (by age)

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The average sum fraudulently taken is £650

Over two thirds of card victims had over £500 transacted fraudulently. And one in twenty reported transactions of over £2,000. There seems to be little connection with age determining amount defrauded, however, those aged 45-54 were the most likely to be defrauded of large sums with 8 per cent claiming to have been defrauded for £2,000 or more

Q: As a victim of credit / debit card fraud, how much money was transacted fraudulently?

It is clear that consumer behaviour is changing for the better, but still has some way to go to be truly effective despite 70 per cent thinking that fraud will get worse as a result of the current recession.

34 per cent of consumers claim they will check their bank statements more regularly this year and nearly a third (29%) more thoroughly. In addition consumers are more likely to be more careful in using their PIN at ATMs (27%) and when making purchases (23%). The threat of payment fraud is also influencing a small minority of cardholders (12%) to reduce the number of payment cards in their possession and 4% of consumers have said they will stop using cards in favour of cash. This is an interesting development as previously the industry put the reduction of payments cards down to better money management and reducing/consolidating personal debt, rather than fear of fraud.

Worryingly a hard core of consumers are still displaying unreasonable care putting themselves at risk from payment fraud. Over 13 per cent allow their cards to be taken out of sight in a shop or restaurant putting them at risk from counterfeit (skimmed/cloned) fraud which saw an 18 per cent increase in 2008 to £169.8m (source: APACS) and nearly one in twenty consumers (5.8%) leave their cards behind a bar to start a tab – inviting payment fraud to take place.

70 % of consumers think that fraud will

get worse as a result of the current recession

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Banks should be responsible for preventing fraud

Continuing the debate about consumer responsibility 47 per cent of consumers think it is the responsibility of the banks to prevent fraud, compared to 32 per cent who believe it should be the responsibility of the cardholder. This may go along way to explain why many consumers are still not taking the necessary basic steps to protect themselves – from checking statements more frequently to keeping sight of payments cards when paying for transactions.

It is interesting to note that consumers aged 16-24 are most likely (51%) to accept it is their responsibility to prevent fraud with those aged 45-54 least likely (26%). Half of consumers aged 45-54 think it is the responsibility of the banks to prevent fraud. This demographic also think the police, government and retailers also have an important part to play.

Q: Who should be responsible for preventing card fraud?

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1.5 Conclusion

The increase in card fraud shows no sign of abating and as this report shows it is the largest cities in the UK that show the biggest problem. London, Cardiff, Glasgow, Manchester and Brighton are the worst affected with over a third of the capital’s inhabitants claiming to have fallen victim to payment fraud in the past.

It is clear that consumers need to do more to protect their own details as many of us rely on our banks to inform us that we have been a victim – encouragingly it is the younger demographic, those aged 16-24, who are most likely to identify fraudulent activity themselves.

In line with APACS payment fraud statistics reporting a big increase in CNP fraud, online fraud is perceived to be the biggest problem with nearly 40 per cent of victims saying they became a victim via the internet. The findings again show a demographic split with the older demographic (55+) less aware of how they have been a victim of fraud.

The threat of fraud, however, does seem to be influencing consumer behaviour for the better. Many consumers are checking their bank statements more regularly and thoroughly and a minority are reducing the number of cards in their possession to mitigate the opportunity of fraud. There are still many consumers, however, not taking adequate steps to protect themselves from card cloning and skimming – this is perhaps influenced by the fact that nearly half of consumers think it is the responsibility of the banks to prevent fraud. Again, it is an older demographic, in this case consumers aged 45-54, who are least likely to accept it is their responsibility to prevent fraud with those aged 16-24 most likely to accept responsibility.

This is an interesting trend and perhaps indicative of how consumers now have a different relationship with the banks today than in the past.

The next set of APACS payment statistics will be published October 2009, so it will be interesting to see if payment fraud has increased in the first six months of the year. Many commentators believe fraud gets worst in a recession as fraudsters change tactics and some consumers resort to desperate measures.

It is clear that

consumers need to do

more to protect their own details

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1.6 Avoiding Card Fraud

Kerry D’Souza, is a card fraud expert at CPP and offers the following advice to consumers to help protect themselves from payment card fraudsters. Kerry has over ten years’ experience and is responsible for CPP’s industry-leading Card Protection product that assists people in the event of lost and stolen payment cards.

Kerry is media-trained across print and broadcast and is available for media interviews on the issue of payment fraud.

Top tips

Never let your payment cards out of sight in a shop or restaurant, as they risk getting copied or cloned

Only carry the cards you need incase you have your wallet/purse stolen. And never carry payments cards loose in a bag or pocket

Never write down your PIN, bank account details or password

Make sure your post is secure. If you are waiting on new credit or debit cards, know when to expect them

When you enter your PIN in a shop or a cash machine, cover the number from prying eyes or hidden cameras. Look out for skimming machines which can be placed over the card slot and contact the police if you see anything suspicious

Sign up to Verified by Visa or MasterCard SecureCode to prevent online fraud

Never respond to unsolicited e-mails or phone calls asking for personal information – your bank will never ask you to confirm your passwords or account details

If you cards are lost or stolen, cancel them immediately or sign up to a Card Protection service that will cancel and reorder all your cards with just one phone call from anywhere in the world

Regularly check your bank statements to keep an eye on undetected fraud

If you shop online make sure you have installed anti-virus software, anti-phishing tools and an active firewall. Never use an insecure website

1.7 For further information please contact:

Nick Jones PR and Communications Manager CPP Group Plc Holgate Park York YO26 4GA

Tel 01�04 544 387 E-Mail [email protected] Web www.cppgroup.com

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mailto:[email protected]

www.cppgroup.com

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1.8 About CPP

The CPP Group Plc (CPP) is an international marketing services business offering bespoke customer management solutions to multi-sector business partners designed to enhance their customer revenue, engagement and loyalty, whilst at the same time reducing cost to deliver improved profitability.

This is underpinned by the delivery of a portfolio of complementary Life Assistance products, designed to help our mutual customers cope with the anxieties associated with the challenges and opportunities of everyday life.

Whether our customers have lost their wallets, been a victim of identity fraud or looking for lifestyle perks, CPP can help remove the hassle from their lives leaving them free to enjoy life. Globally, our Life Assistance products and services are designed to simplify the complexities of everyday living whether these affect personal finances, home, travel, personal data or future plans. When it really matters, Life Assistance enables people to live life and worry less.

Established in 1980, CPP has 11 million customers and more than 200 business partners across Europe, North America and Asia Pacific and employs 2,000 employees who handle 16 million consumer sales and service conversations each year.

In 2008, Group revenue was £259.5 million, an increase of more than 15 per cent over the previous year. This is more than five times the sales level of 2000.

What We Do:

CPP provides a range of assistance products and services that allow our business partners to forge closer relationships with their customers.

We have a solution for many eventualities, including:

Insuring our customers’ mobile phones

Protecting the payment cards in our customers’ wallets and purses, should these be lost or stolen

Providing assistance and protection if a customer’s keys are lost or stolen

Providing advice, insurance and assistance to protect customers against the insidious crime of identity fraud

Offering advice to people considering legal action and cover for the costs involved in taking action on a range of legal issues

Providing discounts on everyday lifestyle commodities

Monitoring the credit status of our customers

For more information on CPP visit:

www.cppgroup.com

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CPP is an award winning organisation:

Named in the Sunday Times �008 PricewaterhouseCoopers Profit Track 100

Finalists in the National Business Awards, 3i Growth Strategy category, �008

Finalist in the National Business Awards, Business of the Year category, �007 and Highly Commended in �008

Named in the Sunday Times �006, �007 and �008 HSBC Top Track �50 companies

Regional winner of the National Training Awards, �007

Winner of the BITC Health, Work and Well-Being Award, �007

Highly Commended in the UK National Customer Service Awards, �006

Winner of the Tamworth Community Involvement Award, �006. Finalist in �008

Highly Commended in The Press Best Link Between Business and Education, �005 and �006. Winner in �007

Award Finalist in the National Business Awards, Innovation category, �005

Award finalist for the �003 The Royal Bank of Scotland Sunday Times Business Awards

Recognised as one of the Growth Plus Europe 500 companies

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Uk regional card fraud 2009