UK card fraud fall will mean rise in ID theft

With phishing scams becoming the new viruses, according to some, the UK's losses to credit card fraud took a tumble last year.

According to figures form APACS (Association for Payment Clearing Services), fraud fell by five per cent in 2003 - down from £426.4m in 2002 and £402.4m last year. However, the UK shouldn't go patting itself on the back just yet. A new report from industry analysts Datamonitor puts the drop entirely down to a reduction in fraud on UK cards abroad.

Datamonitor attributes the fall to successful attempts to stop the fraudsters. One such move by the UK banking industry to set up an anti-credit-card fraud unit proved valuable. For a £3m investment in the squad, the industry saved itself £65m in card fraud by stopping some overseas counterfeiting gangs.

Another good move that's reined in the fraudsters, according to Datamonitor analyst Karina Purang is neural networks - banks' computer programs designed to spot unusual spending patterns.

Domestic fraud is still rising, however, with card-not-present, counterfeit and lost or stolen cards making up over 80 per cent of total fraud. Card-not-present fraud - often online transactions where the cardholder can't verify their identity with a signature - is at its highest, with 2003's total rising to £116.4m.

Although banks and financial institutions are hoping soon-to-be-introduced Chip and PIN will cut fraud losses, the new technology won't affect card-not-present fraud.

The hoped-for reduction in fraud may bring with it its own particular set of problems. Datamonitor believes that with one set of their criminal revenue cut off, the bad guys will turn to identity theft to keep the money rolling in.

The amount lost to identity theft rose significantly last year - up by 44 per cent to £29.7m in 2003.