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News

Fall in UK Fraud Losses Accompaniestest Reduction in Card Usability

ValidSoft : 16 March, 2010  (Technical Article)
ValidSoft comments on the 28% reduction in UK bank card fraud losses and attributes it to a tightening in bank transaction validation rather than criminal activity or technical improvements. The result is increased user frustration at refused transactions
New research conducted by the UK Cards Association shows that fraud losses on UK credit and debit cards totalled £440m in 2009, a drop of 28 percent compared with the previous year. The reduction is the first in three years although card fraud remains the main focus of criminal activity.

The UK Cards Association has attributed this reduction to a number of factors including Chip and PIN but John Petersen, Global Head of Business Development at ValidSoft - a company specialising in countering card and internet banking fraud - believes that the headline numbers on card fraud could provide a misleading picture of what is actually happening. John stated, "Fraud is only one side of the picture, the other relates to the customer experience. Most of us will have been in the embarrassing position where our card is blocked despite the fact that we are undertaking a legitimate transaction. One factor behind the reduction in card-present fraud losses is that the banks are actually declining more transactions. Whilst this will undoubtedly reduce fraud, it comes at a cost to the bank and the customer. Our research shows that the vast majority of transactions blocked are legitimate and if banks are to reduce their operating costs and improve the experience for their customers, then they must tackle this issue.

"Whilst Chip and PIN has undoubtedly reduced the levels of fraud in those countries where it is used there are still a number of major countries, including the US, which still rely on the less secure magnetic stripe meaning cloned UK cards are simply used in those countries. The only way to achieve these card-present fraud reductions, without the accompanying increase in processing costs and customer inconvenience, is by correlating the proximity of the cardholder to the physical transaction; a method that can provide a radical shift in card fraud prevention methods.

"Unless the banks around the globe rethink the way they manage their card processing, fraud may reduce but the inconvenience to customers will increase. The reduction in fraud is a welcome trend but at what cost to the customer?"
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