Chip-and-pin cracks up

More evidence this week that the adoption of chip-and-pin card security in the UK has been at best a qualified success. In 2004 - before the technology was widely introduced - card fraud hit a record-breaking £500m, prompting much wailing and gnashing of teeth by consumer groups, banks and card providers. It was time, they told us indignantly, for chip-and-pin. The new system might be expensive but it would put an end to such blatant criminal gain.

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Last Updated: 31 Aug 2010
The truth has turned out to be more complex, not least because the fraudsters themselves are a resourceful bunch who, when faced with any hindrance on the path between themselves and their ill-gotten gains, will quickly find a way round it. Two years later - figs for 2006 have just come out - the overall value of card fraud stands at £428m, representing a 14.4% drop in fraud from the 2004 high. Not that impressive.

The problem is that card fraud is a many-faceted business, and what works for one scenario does not for another. So chip-and-pin has done a stirling job on hammering in-store fraud - down by a massive 47% - but has failed to curb growth in either counterfeit cards - up 3% - or ‘cardholder not present' transactions, up 16%.

Given that the latter kind of business is one of the biggest growth areas in card use - thanks to the boom in online shopping - it's unfortunate that this much-trumpeted and expensive new security technology seems incapable of defeating the cyber-crooks.

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