Last year saw a decrease of around five per cent from £424.6 million in 2002 to £402.4 million in 2003, says Apacs. However, the fall is entirely due to a reduction in the amount of fraud committed abroad on UK cards, whereas fraud on UK-based transactions showed a marginal increase.

Counterfeit card fraud saw the largest reduction, down by 28% (£106.7 million in 2003, compared with £148.5 million in 2002). The bulk of the reduction occurred in mainland Europe where counterfeit fraud was down by £26 million on the previous year. Fraud on lost and stolen cards has also dropped, by two per cent to £106.1 million compared to £108.3 million in 2002. Apacs attributes the decline to sophisticated fraud intelligence systems which help to spot fraud quickly by tracking unusual cardholder spending patterns.

Together, fraud on lost and stolen cards and counterfeit fraud accounted for more than half (53%) of all plastic card fraud. The introduction of chip and PIN, the system which replaces signatures with PINs for verifying payments at the point-of-sale, is being introduced specifically to tackle these fraud categories.

Cardholder-not-present fraud (CNP) is now the biggest fraud type, increasing by six per cent last year to £116.4 million. Areas which traditionally have involved smaller losses also continue to grow. The largest percentage increase in fraudulent activity was in identity theft which grew by 45% to reach £29.7 million, while fraud at UK cash machines grew by 34% to £39 million.

Sandra Quinn, director of communications, Apacs, points out that when plastic cards were first introduced in the 1960s it was never envisaged that they would be used to buy goods and services in an environment where neither the card nor the cardholder would be present.

"Criminals have used this fact to their advantage primarily by stealing people's card details through such techniques as skimming or 'bin raiding'," she says. "The fraudster will always look for new avenues and that means we cannot be complacent."