LOSSPREVENTION&SECURITY 21


REPORT: CARD FRAUD CONTINUES TO FALL


For the second year running the UK has seen a signifi cant drop in the value of online, mail order and telephone order fraud, which fell by an estimated 10% to £239 million in 2010, compared with £266m in 2009


ccording to fi gures from payment processing and fraud prevention systems provider Retail Decisions (ReD), the money lost to the most prevalent type of plastic swindle – card-not-present (CNP) fraud – has fallen progressively since hitting a peak of £328m in 2008. The fact that criminals aren’t getting away with it is due to retailers now screening transactions more carefully. So, although ReD predicts that 2011 will see a further – albeit less signifi cant – drop in CNP fraud, the industry expert is advising against complacency. ReD’s announcement that UK card payment fraud


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has now dropped for the second successive year defi es the signifi cant growth seen over the last fi ve years. This historical rise is partly due to the greater number of credit and debit card details, which cyber criminals can get access to online, as more customers chose to shop on the internet rather than the High Street. This has contributed to CNP fraud now accounting


for 50% of plastic card fraud losses, compared to approximately 10% in 1998, when overall fraud totalled just over £100 million. Carl Clump, ReD chief executive, said: “Fraudsters


are continually adapting to overcome fraud prevention techniques and they communicate constantly in the criminal underworld to share scams. So retailers need a fraud prevention strategy that not just keeps pace, but is one step ahead of the fraudsters. To be truly effective a system needs to be able to spot trends as they are emerging – not just identify them once they’re active.” One such pattern was recently identifi ed in London: The capital has always been a hotspot for the delivery of fraudulently-bought goods. But ReD’s analysts have seen signifi cant growth in new regions of London, away from the traditional East and South East boroughs. This is because retailers are becoming more vigilant about delivering to certain areas and so criminals are starting to use different addresses in less suspicious locations. ReD also constantly tracks the various free email domains that fraudsters favour. Yahoo, Gmail and Hotmail, used in conjunction with other suspicious variables, traditionally have a higher propensity to fraud. But ReD detected that a particular fraud ring had set up their own email domains ending in ‘OBO’ to bypass the standard fraud prevention checks carried out for free-email addresses. ReD’s market-leading ReD Shield system picked up these email domains as high risk and


was able to detect the fraud. Other fraudsters set up email domains ending in doctor.com, dentist.com and lawyer.com to slip through the net. “The sooner patterns like these are spotted, the more potential fraud will be thwarted,” added Clump. “But while the effectiveness of fraud prevention technologies will continue to have a major impact on fraud rates in 2011, and we estimate a further 5% reduction in the value of CNP fraud throughout the year, this downturn is unlikely to be ongoing. We anticipate a return to previous growth trends in CNP fraud for 2012, as fraudsters fi nd more creative ways of conquering new security measures and tightened regulations. Just as the Beijing Olympics saw online fraud rocket in China, we expect that London 2012 will have a similar impact, increasing CNP fraud in the UK.” The company also reported that consumer technology products still top the conmen’s must-have list. Over 5% of attempts to buy the new Apple iPad over Christmas were made by a potential fraudster, reinforcing the need for retailers to be one step ahead of the tech-savvy crooks targeting them. A basic fraud protection system may block suspicious cards, but unless it is tailormade for a retailer’s needs, it may also unnecessarily bar authentic ones. ReD said that, to ensure the best possible protection and maintain the best levels of customer service, retailers should opt for non-intrusive, instantaneous fraud prevention technologies.


MARCH/APRIL 2011 RETAIL TECHNOLOGY


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