Online banking fraud soars in UK

Online banking fraud losses in the UK reached £52.5 million in 2008, a whopping 132% increase on the previous year's tally of £22.6 million, according to annual fraud figures released by payments association Apacs.

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Online banking fraud soars in UK

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Although phishing incidents continue to increase, online banking customers are increasingly being targeted by malware attacks, says Apacs.

The payments body dismisses suggestions that the rise in online banking fraud is in any way connected with the introduction of the Faster Payements Service in May last year.

"Online banking fraud losses in the second half of 2008 more or less match those in the first half of the year," says Apacs.

The Association says the Met's Police Central e-Crime Unit (PCeU) will help tackle these losses by coordinating the work of police forces, the National Policing Improvement Agency and other agencies to improve standards of training and the police response to e-crime across the country.

Last week, UK authorities also set up a new intelligence unit, The Payments Industry and Police Joint Intelligence Unit (PIPJIU) formed from an amalgamation of the banking industrys Fraud Intelligence Bureau (FIB), the body that formerly distributed information between the banking industry and law enforcement throughout the UK - and the intelligence section of the DCPCU. In addition to the creation of the PIPJIU, Apacs has also established a Fraud Intelligence Sharing System (FISS) through which banks can share fraud information in a central database.

Other headline figures from the 2008 stats include an 18% rise in counterfeit card fraud to £169.8 million, a 39% jump in card ID theft to £47.4 million and a 13% increase in card not present fraud to £328.4 million.

Says Apacs: "Although card fraud losses have increased, losses as a percentage of plastic card turnover amounted to 0.12% in 2008 - equating to around a tenth of a penny lost to fraud in every £1 spent on cards - less than the 0.14% figure in 2004. This reflects the positive effect of chip and PIN as well as the fact that we continue to use our cards more and more each year."

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Comments: (1)

A Finextra member 

The continued growth in fraud is evidence of the fact that as an industry we clearly have a long way to go in securing payments transactions. Despite this the fact that the percentage of fraud compared with overall card use is decreasing should be seen as a promising step in the right direction. With the move to EMV, Chip and PIN cards ensured increased security in face-to-face card transactions and ATM fraud. However it has had little impact on stemming the tide of card-not-present fraud. If anything, online transactions have become a more popular target amongst fraudsters as other channels become increasingly secure. Unfortunately, the fraudsters themselves do not disappear, they simply move to softer targets.

At present online payments is one of these soft targets and efforts to reduce fraud must be escalated as card spend in this area increases. The recent roll-out of two factor authentication through card readers by several banks is a good example of strong payment transaction security, however to date this has been limited to online banking transactions. In terms of online payments, Verified by Visa and MasterCard SecureCode both encourage customers to protect transactions by registering an additional password for online payments. This allows financial institutions to confirm a cardholder's identity to the online retailer. However, of the 83 million credit and debit cards currently in circulation in the UK, only 20 million are registered with either. Schemes such as these must be made accessible to all customers for all online transactions, and extended to use two-factor authentication using the card readers issued by banks in order to secure online banking. As the economic downturn continues we are likely to see increasing levels of fraud. Consequently it is essential that areas of weakness in the payments space are addressed sooner rather than later.

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