CNP fraud still rising

The advent of chip-and-PIN technology is shifting general credit card fraud further into card-not-present (CNP) sales channels, according to fraud-busting firm Early Warning.

The company has reported a 30 per cent year-on-year increase in the amount of CNP fraud data that has been gathered by the organisation in the first two months of 2005.

"Our figures back up the view that chip and PIN is simply displacing the fraud problem into CNP sales channels," said Andrew Goodwill, managing director of Early Warning.

"When fraud is perpetrated in this way, the retailer is liable and the card companies can ignore the problem. The retailer is effectively getting screwed twice: once by the fraudster, and then by the card company taking its fees on the fraudulent sale."

However, the Association for Payment Clearing Services (APACS) disagreed, claiming that without chip and PIN, card fraud losses will top £800m by 2005. APACS' latest figures, released last week, showed that CNP fraud continues to be the biggest fraud type, increasing by 24 per cent to £150.8m last year, compared with £122.1m in 2003.

Sandra Quinn, director of corporate communications at APACS, told CRN: "Chip and PIN has been designed to tackle lost, stolen, and counterfeit cards. Although CNP transactions have increased, actual CNP fraud levels have gone up by only 50 per cent over five years. It is not as black a picture as people are making out."

Bob Tarzey, service director at analyst Quocirca, said: "The standard checks of card number and three-digit security number on the back of credit cards are just not enough. Additional checks of some description need to be introduced, particularly because the number of CNP transactions will increase as more people start shopping online."

laura_hailstone@vnu.co.uk