Card fraud grows four times faster than transactions

Credit card fraud is growing at an exponential rate, last year alone accounting for more than $120 million in bogus transactions.

ADELAIDE: Australian credit card fraud rates grew at four times the rate of the num ber of card transactions during 2008, according to figures contained in a new white paper by information security specialist CQR Consulting.

In the whitepaper, Credit Card Fraud – What You Need to Know, analysis shows that common forms of card fraud accounted for more than $120 million in fraudu lent transactions last year. Fraud caused by counterfeit cards or skimming leapt by more than 50 per cent. The analysis is based on payment fraud statistics published by the Australian Payments Clearing Association.

Australians face two main ways to be cheated by credit card thieves.

The first, counterfeit cards or skimming, occurs when a device is used to scan a card and obtain information hidden in the magnetic stripe. This stripe is then repli cated and used fraudulently. In 2007 the cost of fraud due to counterfeiting/skimming cards was $32.8 million. In 2008 this rose by more than 51 per cent to $49.7 million.

The second, Card Not Present (CNP) fraud, describes transactions where neither the card nor the cardholder is present at the time of transaction. This can include orders by mail, telephone, fax or internet and involves using fraudulently obtained card details to make a purchase. Such details are often gathered through electronic means. The total cost of CNP fraud in 2007 was $53.7 million, rising 33 per cent in 2008 to in excess of $71.5 million.

CQR’s Steve Darrall said the growth in card fraud rates was leading to increased efforts by banks and card brands to reduce their exposure to the activity.

“We’re currently seeing a strong push across the banking industry for merchants that accept card payments to improve their defenses,” he said. “This involves minimising the need for them to hold sensitive cardholder information and securing essential information storage.”

Two key initiatives to improve the security of card transactions and cardholder information are:

• Payment Card Industry Data Security Standard (PCI-DSS) – Developed by the big cred it card brands, the standard applies to all organisations that store, process or transmit cardholder payment data, regardless of their size or transaction numbers; and

• Payment Application Data Security Standard (PA-DSS) – This standard applies to soft ware applications designed to store, process or transmit payment card information.