Uk regional card fraud 2010

UK Regional Card FraudA CPP white paper

January 2010

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UK Regional Card Fraud January 2010

1.1 Foreword

1.� Industry Facts

1.3 Research methodology

1.4 Key Findings

Payment fraud continues to affect more victims

Cardiff leapfrogs London to be 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 amount fraudulently taken is £590

Consumers are more concerned about card fraud compared to last year

1.5 Conclusion

1.6 Avoiding Card Fraud

1.7 Further Information

1.8 About CPP

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Contents

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1.1 Foreword

As we enter 2010, the picture of fraud across the UK is somewhat mixed. On one hand we have figures from The UK Cards Association and the Cheque and Credit Clearing Company showing card fraud in the first half of 2009 decreasing by 23 per cent to £232.8m compared to the same period in 2008. Although only half-year figures, the reduction of fraud was largely due to a reduction in counterfeit fraud – down from £88.8m to £46.3m – and card-not-present fraud – down from £163.9m to £134m. Within this total, however, losses from online banking fraud were up 55 per cent to £39m and Card ID theft also showed a 23 per cent increase to £23.9m.

The 2009 year end fraud statistics will be out March 2010 and it will be interesting to see if they back up the assertion that fraud rises during times of recession.

On the other hand, CIFAS – the UK’s Fraud Prevention Service, said fraud at the end of the third quarter of 2009 had continued its inexorable rise. Driven by an 11 per cent increase in fraudulent activity including a 38 per cent upturn in misuse of facility fraud – where an account, policy or other facility is used fraudulently – compared with the same period in 2008. CIFAS has also reported a 37 per cent increase in the number of victims of impersonation and an 18 per cent increase in facility or account takeover fraud.

What is clear, however, is that fraud is not here today and gone tomorrow and fraudulent activity should never be viewed out of context. If the economic slowdown goes hand-in-hand with an increase in fraud, then it also influences the type of fraud. The increase in the numbers of victims of impersonation and account takeover help confirm this due to the reduction in new credit lending.

What is clear, however, is fraud affects us all – the private and public sector, government and individuals and the need to stop the flow of fraudulent transactions is a shared responsibility. At the heart of this responsibility, however, is the individual. They can, through some proactive preventative measures, help reduce their exposure to fraud and help reduce the annual fraud bill. What this paper clearly points to is that fraud remains a problem, but that more could be done to educate financial consumers about the risks and mitigating behaviour.

Online banking

fraud losses up

55 per cent to £39m

Introduction

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1.� Industry Facts

Card fraud losses down 23 per cent to £232.8m in the first half of 2009 compared to the same period in 2008 (source: Financial Fraud Action UK)

Card-not-present fraud down 18 per cent to £134m in the first half of 2009 (source: Financial Fraud Action UK)

Online banking fraud losses up 55 per cent to £39m (source: Financial Fraud Action UK)

Card ID theft up 23 per cent to £23.9m in the first half of 2009 (source: Financial Fraud Action UK)

The first nine months of 2009, over 175,000 cases of fraud, up 11 per cent from the same period in 2008 (source: CIFAS)

The first ten months of 2009 saw a 37 per cent increase in the numbers of victims of impersonation – people whose identities have been hijacked by identity fraudsters – to 68,114 (source: CIFAS)

The first ten months of 2009 saw a 18 per cent increase in the number of facility or account takeovers to 18,563 (source: CIFAS)

Annually, CPP cancels over a quarter of a million payment cards in the UK that have been lost or stolen helping to fight card fraud, particularly face-to-face or retailer fraud and card-not-present fraud

1.3 Research Methodology

CPP commissioned research in 2010 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 just over 2,000 UK credit and debit card holders aged 18+ were questioned by Tickbox.net/Opinion Matters.

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Card fraud losses down 23 per cent to £232.8m in the first

half of 2009

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1.4 Key Findings

Payment fraud continues to affect more consumers

26 per cent of consumers claim to have been a victim of card fraud in the past – a reflection of the explosion of new scams propagated by criminals. This headline figure has risen by 6 per cent from 20 per cent in 2007. This peaks at 32 per cent where consumers are aged 55+. Those aged 16-24 are least likely to have fallen victim to card fraud (10%). Men are more likely (29%) than women (24%) to be affected by card fraud.

According to CPP internal data, however, women are slightly more likely to report their cards lost or stolen then men (56% vs.46%).

Q: Have you ever been a victim of card fraud?

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Cardiff leapfrogs London to be the worst city for fraud in the UK

Cardiff has leapt from fifth to first place since the index started in 2007. Card crime in the Welsh capital has increased by 17 per cent in the last two years, with over a third (37%) having been a victim in the past. While Cardiff reports to be the worst place for card fraud, other fraud hotspots were London (35%), Norwich (30%), Southampton (28%), and Leeds (27%), which has leapt from twelfth position to fifth in just 12 months.

Belfast (19%), Sheffield (17%) and Liverpool (15%) are the cities least affected.

Q: Have you ever been a victim of card fraud by region?

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Worst cities for card fraud:

Almost half (43%)

of card fraud victims only knew they had been defrauded when their

bank notified them

City Percentage of people affected by card fraud

�009 �008 �007

Cardiff 37 (1) 34 (2) 20 (5)

London 35 (2) 38 (1) 28 (1)

Norwich 30 (3) 25 (6) 19 (9)

Southampton 28 (4) 24 (7) 14

Leeds 27 (5) 19 19 (8)

Newcastle 25 (6) 16 9

Plymouth 24 (7) 22 (10) 16

Glasgow 24 (8) 31 (3) 20 (6)

Edinburgh 24 (9) 23 (9) 18 (10)

Nottingham 23 (10) 12 19 (7)

Birmingham 23 23 (8) 25 (2)

Brighton 23 27 (5) 12

Manchester 21 29 (4) 22 (4)

Bristol 20 18 22 (3)

Belfast 19 (17) 13 6

Sheffield 17 14 18

Liverpool 15 19 14

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

Almost half (43%) of card fraud victims only knew they had been defrauded when their bank notified them. On the other hand, 40 per cent discovered fraud by reading bank statements and identifying transactions they did not recognise.

A small minority (9%) suffered the inconvenience and possible embarrassment of rejected payments and being unable to withdraw money out of a cash machine.

As you might expect, those aged 45-54 are the most likely to identify fraudulent transactions (44%) by reading through their bank statements. This practice decreases as people get younger with 16-24 year olds the least likely to identify fraudulent transactions by reading their bank statements. This is a worrying trend as new financial consumers are taking the least responsibility to monitor for fraudulent transaction and help fight card fraud. This demographic may benefit from being educated about the consequences of fraud and what it means for them.

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The importance

of monitoring bank

statements and accounts will be even

more important

as we move into 2010

Accordingly, 16-24 year olds are the most likely (56%) to be notified by their bank that they are a victim of fraud as opposed to only 40 per cent of 35-44 year olds.

When asked how long it took to report the loss or theft of their cards, most victims (39%) reported cancelling their cards within the hour, but it took one in five (21%) between 1 and 5 hours and the same percentage between 6 and 24 hours. 12% put themselves at considerable risk from fraudulent transactions as they took up to 72 hours to report the loss or theft of their payment cards. The benefits of a Card Protection loss reporting service that immediately cancels all financial cards is clear when it is a race against time to stop a fraudster using stolen bank details either online or in a face-to-face retail environment.

The importance of monitoring bank statements and accounts will be even more important as we move into 2010. The rise in threat sophistication will challenge existing security practices. User vigilance and responsibility has to be considered an essential part of the protection process. New techniques include a Trojan’s ability to silently interrupt a legitimate transaction to make an unauthorised withdrawal and simultaneously check the user’s transaction limits to stay below them and avoid alerting the bank.

With these types of threats it is imperative card holders regularly check their accounts and look to identify any potential fraudulent transactions.

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

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Online fraud is a big problem

Consistent with card fraud statistics with The UK Cards Association, 32 per cent of victims said they became a victim of card fraud through online channels, 17 per cent to card cloning from a cash point or Chip and PIN device and 6 per cent to losing or having their payment cards stolen. Worryingly, over a third of consumers (34%) have no idea how they were defrauded.

As you might expect 16-24 year olds are most likely (56%) to be defrauded online – this is no doubt due to their propensity to shop and conduct more of their lives online. This includes the use of a wide spectrum of online sites including social networking forums like Facebook and bebo where there is the propensity to log sensitive personal information. Just under a third (29%) of 35-44 year olds reported falling victim to online scams.

In its 2010 Threat Predictions report, MacAfee Inc. believes Facebook and Twitter will be platforms for emerging threats as users become more vulnerable to attacks that blindly distribute rogue applications across their networks and cybercriminals take advantage of friends trusting friends to get users to click on links they otherwise treat cautiously. Recent changes to Facebook’s security settings were recently criticised for putting more people at risk from criminals.

It is interesting to note that 16-24 year olds are more aware of how they have been defrauded (89%), whereas only 61 per cent of 45-54 year olds understand the source of the fraud.

24 per cent of 25-34 year olds were the most likely to have their cards cloned at an ATM cashpoint or Chip and PIN machine.

In the first half of 2009 (January – June), online banking fraud losses stood at £39m up 55 per cent. This has been attributed to the large increase in criminals using more sophisticated methods to target online banking customers through malware scams – which target vulnerabilities in customers’ PCs – rather than the banks’ own systems which have proved almost impossible to penetrate. There were also more than 26,000 phishing incidents during January to June 2009 – a 26 per cent increase on the amount seen in the same period last year. The increased sophistication of phishing emails is expected to continue in 2010.

Elsewhere half-year 2009 losses from counterfeit fraud from skimmed and cloned cards totalled £46.3m down 48 per cent, fraud on lost and stolen cards was £25.1m down 6 per cent and card-not-present (CNP) fraud was down 18 per cent at £134m. The decrease in CNP fraud has been attributed to the sophisticated fraud screening detection tools by retailers and banks, as well as the continuing growth in the use of MasterCard SecureCode and Verified by Visa that make online shopping more secure.

Card identity fraud losses were up 23 per cent to £23m due to a rise in account takeover, whereby criminals take over the running of another person’s credit or debit card.

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Q: Which one of the following best describes how you became a victim of card fraud – by gender?

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Q: Which one of the following best describes how you became a victim of card fraud – by age?

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The average amount fraudulently taken is £590

The average amount victims report being defrauded by is £590, with one in six victims (16%) reporting losses of over £1,000. This sum is down slightly on the 2008 average figure of £650. A third of victims (33%) reported losses of under £100; concurrent with the practice of fraudsters taking a small amount out of a live account to test if funds are available before trying to extract a much larger amount later on.

There seems to be little connection with age determining amount defrauded, however, those aged 34-54 were the most likely to be defrauded of large sums, with 26 per cent claiming to have been defrauded between £1000 - £2,000.

Men reported slightly larger losses of £661 verses £533 for women.

Q: As a victim of fraud, how much money was fraudulently transacted?

Men reported slightly larger losses of £661 verses £533 for women

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Despite almost a fifth of consumers (19%) admitting they are more worried about card fraud compared to last year, many people confess to taking actions that put them at risk. One in six (16%) adults has committed the cardinal sin of letting their cards disappear out of sight in a restaurant or a shop, putting them a risk from counterfeit fraud – the vast majority of this fraud is due to criminals stealing card details in the UK to make counterfeit magnetic stripe cards for use in countries like the United States, Canada, Spain, Italy and Australia where they are yet to upgrade or fully implement Chip and PIN verification.

CPP’s own internal data shows that restaurants, bars and shopping are hot spots responsible for 37 per cent of all lost and stolen cards.

A further 12 per cent have written PIN numbers down putting them at risk of fraud on lost and stolen cards and accusations of not taking reasonable care to cover fraud liability. One in ten have allowed someone to take money out on their behalf and 7 per cent have left their debit/credit cards behind a bar to open a tab – all inappropriate behaviour that puts people at a heightened risk from card fraud.

Those aged 25-34 are the worst offenders with a quarter (25%) allowing their cards to disappear out of sight in restaurants and shops and 12 per cent leaving their cards behind a bar to open a tab.

However, it is not all bad news. Many consumers claim to be taking precautions against falling victim including 33 per cent of consumers who 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 (30%) and when making purchases (23%). The threat of payment fraud is also influencing a minority of cardholders (18%) to reduce the number of payment cards in their possession and 4 per cent 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 payment cards down to better money management and reducing/consolidating personal debt, rather than fear of fraud. Remember this is claimed behaviour so it may not be consistent with the number of payment cards in circulation.

When asked what criminals used the cards for fraudulently, over one in five (22%) victims had their money spent on electronic goods and clothing, while some victims reported jewellery and even holiday bookings. Most did not know what goods or services were bought illegally.

Many consumers

claim to be taking

precautions against falling

victim

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1.5 Conclusion

There is no doubt that fraud is a major issue in the UK with this report showing that one in four adults has been a victim at some time in the past. Increasing by 6 percentage points in the last two years this equates to three million additional victims who have been inconvenienced by card or identity fraud.

For the first time since the index started London has been pipped at the post with Cardiff now reporting more residents who have reported falling victim; 37 per cent now claim to have fallen victim to some form of card fraud.

Somewhat concerning, nearly half the victims of card fraud questioned only realised they were a victim when their bank contacted them. A small minority only discovered the fraud through the inconvenience of rejected payments and being unable to withdraw money from a cash machine. Rather worryingly it is the young financial consumer aged 16-24 who is most reliant on their bank to inform them as opposed to 45-54 year olds who are most likely to identify the fraud themselves.

In line with the growth of card-not-present fraud over the last few years, which in 2008 accounted for over 50 per cent of all card fraud losses, the report shows that a majority fell victim through online scams with counterfeit fraud from card cloning and skimming next prevalent. The 16-24 year olds were most likely to be defrauded online, possibly due to the fact that they conduct more of their lives online and are less security conscious than older demographics.

Encouragingly the average amount victims are defrauded has fallen 10 per cent to £590.

Despite the threat of fraud and almost a fifth of consumers admitting they are more concerned about fraud this year, many people confess to inappropriate behaviour that could put them at risk of fraud. Actions such as letting their cards disappear out of sight when in restaurants and shops and leaving them behind the bar to open a tab are behaviours that could be argued are not consistent with taking reasonable care to protect financial information. Likewise a small minority confessed to writing their PIN number down, putting them at risk from retailer fraud and unauthorised ATM transactions.

However, the concept of personal responsibility does seem to be on the agenda for some consumers. A third claim they will check their bank statements more regularly and thoroughly this year, and some have reported to be planning to reduce the number of cards in their possession. The rationalisation of cards by consumers has not previously been linked to the threat of fraud, so this is an interesting development that we should watch moving forwards.

The next set of card fraud statistics for 2009 will be published by Financial Fraud Action UK in March 2010, so it will be interesting to see whether the losses follow the decrease in financial fraud losses reported across the first six months of 2009, or conversely whether the recession has a direct correlation on making fraud worse as predicted by CIFAS – The UK’s Fraud Prevention Service. Of course the increase in the number of victims reported by CIFAS in the first ten months of 2009 does not necessarily mean more financial losses; as explained by the average amount defrauded falling by 10 per cent year-on-year in this report. The restriction on new lending and tighter credit facilities may explain this paradox.

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1.6 Avoiding card fraudSarah Blaney is a card fraud expert at CPP and offers the following advice to consumers to help protect themselves from payment card fraudsters. Sarah has over five 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.

Sarah 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 in case you have your wallet/purse stolen. And never carry payment 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 your 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 unsecure website

1.7 For further information please contact:Nick Jones PR and Communications Manager CPP Group Plc Holgate Park York YO26 4GA

Tel 01904 544 387 E-Mail [email protected] Web www.cppgroup.com

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CPP is an award- winning organisation:

Finalist in the National Insurance Fraud Awards, Counter Fraud Initiative of the Year category, �009

Finalist in the European Contact Centre Awards, Large Team and Advisor of the Year categories, �009

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

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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 and South 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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Documents

Uk regional card fraud 2010