Turning the Tide of Plastic Card Fraud

Published date01 January 1996
Date01 January 1996
AuthorLorna Harris
Journal of Financial Crime Vol. 3 No. 3 Banking Fraud
Turning the Tide of Plastic Card Fraud
Lorna Harris
Plastic card fraud is a worldwide problem that has
been with us since the first mass issue of cards in
the late 1960s. The level of plastic card fraud is,
therefore, a symptom of success of the card busi-
In the UK, there are around 35m people who
between them hold about 86m cards, many of
which are multi-functional incorporating cheque
guarantee, ATM (cash dispenser) and debit/credit
functionality. In 1994, over
retail trans-
actions using plastic cards were recorded, as well as
cash machine withdrawals. These figures
demonstrate a very clear indication of the public's
growing reliance on cards as a means of payment.
Indeed, in order to put the scale of plastic card
fraud into perspective, it is important to emphasise
the majority of all transactions over 99.9 per
cent are genuine. Almost every customer at a
point of sale is honest and virtually every success-
ful application for a plastic card is genuinely made.
Furthermore, nearly every plastic card is safely
delivered to the proper address.
Given this environment, it is all the more
worrying that fraud losses suffered by the UK's
banks and building societies have increased at
extraordinary and unacceptable rates. The period
1988-91 saw a 70 per cent growth in the level of
plastic card transactions compared with a cumula-
tive 340 per cent increase in fraud losses.
Against this background, the UK's major banks
and building societies agreed that a collective effort
was needed to stem the losses, which peaked at
£165.5m in 1991. The vehicle for this action has
been the Plastic Fraud Prevention Forum (PFPF),
operating under the umbrella of the Association
for Payment Clearing Services (APACS), the body
with responsibility for overseeing payment clearing
activities in the UK.
The immediate result of a series of short-term
fraud prevention initiatives launched by the PFPF
was to contain the rising level of fraud losses in
1992 at £165m. The year 1993, however, was the
first year to show a significant drop in the losses
suffered by plastic card fraud with total losses fall-
ing to £129.8m, and in 1994 the trend continued
with total losses falling again to £96.8m, a drop of
almost 40 per cent in two years (Figure 2).
That the figures have begun to show a marked
decrease is a reflection of the success of the poli-
cies now in place and is a tribute to the very close
cooperation which the payments industry enjoyed
with others involved in the fight against plastic
card fraud, especially the retailers and the police.
Bearing in mind the varied nature of plastic card
fraud and the adaptability of the offenders, this
success is considered a real achievement
especially as, at the beginning of the decade, plastic
card fraud was undoubtedly one of the fastest
growing crimes in the UK.
The single most effective measure has been the
authorisation strategy which, by introducing lower
floor limits in retailers has increased the number
of transactions which need to be authorised. Since
it was clear that fraudsters were targeting particular
retailers, as a first step, lower floor limits were set
in those eight sectors which were seen to be par-
ticularly prone to fraud. The floor limit in a retail
outlet determines whether the retailer has to seek
authorisation for a particular transaction. If a
fraudster tried to use a stolen card in that shop and
the card had been reported lost or stolen, the loss
or theft would be revealed by the authorisation
check and the transaction could not proceed. This
strategy, in its initial stage, was responsible for
reducing fraud by 75 per cent in the sectors in
which it operated in respect of those cards which
had been reported lost or stolen. So successful was
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