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CNP Fraud on UK Cards Up 23 Percent in First Half of 2014

The latest figures on card fraud losses in the United Kingdom, coming from industry group Financial Fraud Action UK, support the expectations of most industry experts that when EMV rolls out in the United States it will have a positive impact on deterring counterfeit cards and fraud at the point-of-sale, but lead to more fraud attempts and losses in the Card Not Present channel. In short, CNP fraud is up nearly 25 percent, fraud on contactless card payments is negligible, and a slight increase in counterfeit card fraud is attributed to UK-issued cards being counterfeited and used in nations that have not yet implemented Chip & PIN / EMV.

According to Financial Fraud Action (FFA) UK, an industry group that works in partnership with The UK Cards Association, fraud losses from CNP purchases on UK issued cards in the first six months of 2014 totaled £174.5 million, a 23 percent increase from the first six months of 2013. Excluding mail order and telephone order (MOTO) transactions and focusing on eCommerce, losses between January and June 2014 on UK-issued cards reached £110 million, also a 23 percent increase from the first six months of 2013. Total online shopping increased from 2013 to 2014 over this time period as well, but by only by 16 percent, reaching £47 billion.

Based on these figures for eCommerce fraud losses and online shopping volume on payments cards issued in the UK, the monetary-based fraud rate was 23 basis points (0.23 percent), which is three times higher than the overall card fraud loss rate of 7.4 pence per £100. Total fraud losses on UK cards exceeded £247 million in the first six months of 2014, up 15 percent from the same period one year prior. Card Not Present fraud accounts for 70.5 percent of total fraud losses on UK-issued cards while eCommerce alone represents 57.4 percent.

Cardholders and issuers in the UK have benefited from Chip & PIN cards for several years now, leading to a significant decrease in counterfeit card fraud compared to a decade ago. However, many of this fraud has just move to other channels. In 2003, for example, counterfeit card fraud exceeded £110 million while CNP fraud was over £122 million, of which £45 million was eCommerce. Fast forward to 2013 and counterfeit card drops to £43.4 million while CNP fraud exceeded £301 million, including £163.2 million in eCommerce card fraud losses. In the first half on 2014 FFA UK noted a slight increase in counterfeit card fraud, up 4 percent to £24.2 million. However, the industry group also notes that the primary driver for this increase is the fact that stolen card credentials are being used in other countries where EMV or Chip & PIN cards have yet to be implemented.

Meanwhile fraud on contactless payments, which are payments under £20 and do not require the cardholder to enter their PIN, was almost non-existent. In the first half of 2014 fraud on UK-issued cards for these transaction was less than one basis point at 0.007 percent of the contactless card payment volume, only £51,000 in losses.

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