Banking industry set to crack down on plastic card fraudsters

Radical measures are being adopted by the banking industry to counter rising credit and debit card fraud, which now exceeds an estimated £1 million per day in the UK alone.

In a daring move, the Association for Payment Clearing Services (APACS) is looking to phase out traditional verification methods – whereby signatures are used to authorise transactions – in favour of customers being asked to key-in their PIN (Personal Identification Number) at the terminal. According to an APACS spokesperson, this new authorisation method will be up-and-running by 2005.

In practice, the authorisation method will work in conjunction with secure chip cards whereby the PIN is encrypted into the chip. That said, customers will still be able to alter their PIN at a standard ATM (cash machine).

Despite the estimated cost of over £1 that will be needed to produce each chip, APACS estimates that this 'chip-and-PIN' system will more than halve UK fraud losses – music to the ears of retail security managers and loss prevention specialists. It will cost an estimated £1.1 billion to implement the scheme over the next two-to-three years.

A number of the country's best-known retailers – including the Dixons Group, Going Places, Marks & Spencer, Sainsbury's and Wickes – are working closely with APACS to deliver a public trial of PINs at cashtill points in a town whose identity will be announced shortly. The trial, due to start next Spring, will effectively form the first part of a national roll-out of the scheme.

Over the next two-to-three years all 100 million UK debit, credit and charge cards will be re-issued with chip and PIN capability. The chips will offer global interoperability, as they'll be configured to meet international specifications set by the international card schemes Europay/MasterCard and Visa (EMV). Most European countries are about to issue cards to the same specification.

Speaking exclusively to Security Management Today, APACS' representative Richard Tyson-Davies said that the programme would help prevent card 'skimming' (whereby magstripe information is illegally copied to produce duplicate cards). This accounted for over £150 million of the £411 million card fraud losses reported in 2001.

In conjunction with the chip-and-PIN verification system, the Association for Payment Clearing Services has been liaising with the police service to set up a dedicated national joint bank/police squad later on this year with support from the Home Office.

The squad is being formed to help tackle organised crime involving plastic card and cheque fraud, which rose by approximately 30% in 2000-2001.