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Chip and PIN: not enough to beat card fraud

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Chip and PIN payment cards are currently being trialed in Northampton, before a planned nationwide rollout. The introduction of chip and PIN will certainly be an important development in the fight against card fraud. However, as one police chief has now pointed out, new technology may only deflect fraudsters' attentions to other areas.

Chip and PIN payment technologies have rightfully been viewed as an important weapon in the fight against payment card fraud. Currently chip and PIN technologies are being trialed in Northampton and the nationwide roll-out is expected by December 2004.

Should the UK achieve this deadline, it will be the first country in the world to declare itself fully EMV compliant. EMV is the common standard that will eventually ensure that chip cards can be used in any country that has adopted it.

Yet, as a police chief has pointed out this week, chip and PIN technologies won't be the end of card fraud. Detective Chief Inspector Steve Eastwood, operational head of the dedicated check and plastic crime unit, has warned the outcome of the introduction of chip and PIN could be a shift in fraudsters' attentions to other, more vulnerable areas. In the payment space these are likely to be telephone, Internet and mail order transactions. Card not present (CNP) fraud, the collective name for fraud via these channels, amounted to GBP110 million in 2002, up by 15% on 2001.

It is also possible that the introduction of chip and PIN will result in an increase in identity fraud. Identity fraud is where fraudsters use personal details to order credit cards and check books in the name of someone else. In 2002, identity fraud was up 41% to GBP21 million.

So what is the answer to the card fraud conundrum? It must surely lie in joining up the various card fraud initiatives in a multi-pronged approach. This would include the move to chip and PIN but also the initiatives that have relevance to CNP transactions such as address verification and Visa and MasterCard's online security initiatives, branded Verified by Visa and MasterCard SecureCode. Launching this multi-pronged approach would ensure that every area of the payment space is sufficiently protected and that solutions in one area do not merely add problems to another.

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