February 07, 2008

Chip&PIN cards: 1 in 5 cloned?

More dramatic claims that fraud is reaching endemic (?) proportions in retail payment systems in the UK:

Fraud is now most common over the internet, where almost 2 in 5 have fallen prey to fraudulent scams. Alarmingly, nearly 1 in 5 people have also had their cards cloned from ATMs and Chip and PIN machines, highlighting the importance of exercising vigilance with your cards and personal details at all times. ... "Card fraud is a serious concern that is still common despite preventative measures put in place to combat this, including Chip and PIN," said Zoe Manton, head of Card Protection at CPP. "Fraud levels increased by 26% in the first six months of 2007 compared to the same period in 2006, to reach £264m."

Manton said that although we are regularly told to report our lost and stolen cards immediately, on average we are taking nearly ten hours to tell our banks and card companies. The good news is that 56.7% of respondents said they now check their bank statements thoroughly to pick up on any suspicious activity.

I am not sure what is 'good' about the good news. Let's see if we can break it down.

In exchange for the right to invest in subprime real estate, the banks had a responsibility to secure the money. Now they've succeded in outsourcing the responsibility back to us, the account holder. If the banks have succeeded in getting the people to no longer trust bank-supplied payment systems, and they consider this good news, chances are they'll be overjoyed if we also remove the cash as well as the trust...

Yep, looks like a break down to me.

Of course, we know the underlying systemic cause of all this is the failure of competition in European payment systems. Problem is, every time that subject comes up, the regulators say "SEPA is rolling out very nicely, thank you..." Students of irony take note...

Posted by iang at February 7, 2008 04:29 AM | TrackBack

A few gems in the 'advice' at the end of the news item (BTW link not woking as is)

- "Make sure your post is secure": How?
- "Only carry the cards you need": Should I have any I don't need?
- "If you store valuable documents at home, for example, passports, driving license and bank statements": Where else will I store them, in a warehouse?

Posted by: Anonymous1 at February 8, 2008 01:50 AM

Consumers prefer entering a PIN when using a debit card over all types of signature-based card payments, whether credit or debit, Gartner found. Banks promote signature-based debit payments because they earn more fee revenue from card-accepting merchants.

Banks charge more on the premise that signature-based payments are riskier and more prone to theft.

"Fraud rates on signature-based debit card payments are at least 10 times higher, and banks usually eat these costs if they are incurred in a card-present (or store) environment," Gartner analyst Avivah Litan said in a statement. "Higher interchange fees paid by merchants to banks and card issuers for signature-based transactions must offset these costs or else banks wouldn't promote the signature variety."

People's least favorite payment type is contact-less, or wireless, payments, Gartner said. There is similarly small interest in using mobile phones to make payments.

Gartner advises brick-and-mortar businesses that accept electronic payments to promote use of PIN-based debit-card payments by offering store-based incentive programs.

"Businesses pay less to banks for PIN-based payments and since consumers prefer them anyway, this is a win-win strategy for all parties except credit card issuers and banks," Litan said.

Posted by: Consumers Favor PINs Over Banks' Debit Payment Needles at February 8, 2008 10:27 AM

A little of the "consumers favor PINs" article discussed in this post/thread

including discussion of various efforts regarding various alternatives over nearly two decades

and runs into followup post

which wanders into this reference over at digital money; short lead-in

How pathetic is it that when I want to buy something on the Internet using my bank card I have do mess around typing in endless details, numbers, codes, passwords and the like. It's all so 1994. In an a modern economy, that sort of thing is seen as being on a par with Babylonian clay tablets or filling out paper forms to make a SEPA Credit Transfer. But in advanced countries, there is another way:

... snip ...

aka, dates back to the payment gateway
done with small client/server startup that had invented this technology SSL
that they wanted to apply to the business processes ... now frequently referred to as "electronic commerce".

Posted by: Lynn Wheeler at February 9, 2008 09:42 AM
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