By Paul Kunert
28 July 2008
Cardholder-not-present (CNP) scams are likely to keep rising through 2008 and beyond with no comprehensive fraud busting solution on the horizon to offer online resellers a similar safeguard that chip and PIN affords consumers.
Fraud figures released by the Association of Payment Clearing Services (APACS) showed the number of losses in the UK during 2007 rose 25 per cent to £535.2m with CNP accounting for £290.5m and growing at 37% year-on-year.
The data for the first six months of 2008 is not out till later this but a spokeswoman at APACS told Microscope it was anticipating the level of CNP deceptions would continue at the same rate.
“I would expect that we will see more of what we saw in 2007, CNP fraud will continue to be responsible for the lion share of the losses in the UK and credit card fraud abroad should continue in countries without chip & PIN,” she said.
CNP fraud has been on the rise since 2002 and despite poorly marketed solutions including Verified By Visa and Securecode by Mastercard – which do not cover telephone orders - there is no system in place to help etailers overcome the crime.
It is online traders that are made to pay for CNP when frauds are found to have been committed, as the baking sector will levy charge backs to protect the cardholder and themselves.
The problem is “out of control” said Nick Glynne, managing director at Easy Computers, “the despairing thing for me is that the banks haven’t got a clue how to deal with it in the same way they did with cardholder present”.
Only a two factor card authentication system like chip & PIN could address CNP he added but as the banking sector does not pay for CNP there is not the same priority to roll out new processes.
The hidden cost of dealing with CNP is manually sorting through orders to separate the genuine customers from the fraudsters and having to reject certain orders that look risky when they may be legit said Glynne
Jonathan Wall, marketing director at Dabs.com said it had been forced to make changes to its systems to try and “shut down” fraud by allowing staff to only ship to the billing address, “it hurts but is something we had to do.”
Fraud experts at The 3rd Man have compiled a list of hotspots for card cons in the UK with South East London coming out as the worst offender, based on the analysis of 30 million credit card transactions over a six month period – January to June.
The only part of the UK that has succeeded in reducing credit card scams is Liverpool and Kilmarnock. “This is because local policing activity has targeted these criminals and its having a clear impact,” said Andrew Goodwill, director at The 3rd Man.
