Card not present fraud costs $189 million

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Card not present fraud costs $189 million

Overseas hacking contributes to spike in CNP fraud.

The move by more Australians to shop online has driven another spike in payments card fraud, with Australian retailers catching up to their offshore counterparts in fraud numbers, according to data released by the Australian Payments Clearing Association (APCA).

The data shows card not present (CNP) fraud jumped by 15.5 percent over the past financial year to $189.4 million, up from $164 million in 2011.

Total payments fraud on Australian cheques and payment cards increased from 13.2 cents to 15.6 cents in every $1000 transacted over the past 12 months.

Despite the increase, APCA chief Chris Hamilton said countermeasures against overseas hacking attacks that had contributed to the spike had been in place for more than six months.

APCA is calling on consumers to take advantage of online authentication tools such as MasterCard SecureCode and Verified by Visa, however both have had relatively low uptake by retailers.

APCA blamed the spike in CNP fraud on growing retail activity in the online space, with many more businesses, in particular small and medium sized retailers, moving online.

"CNP fraud requires effort from everyone, from the retailer, through financial institutions and card schemes, and in the end from the consumer," Hamilton said.

Security analyst Stephen Wilson said authentication tools such as Verified by Visa had experienced years of terrible take-up and disappointing performance, and argued increased online shopping was no excuse for the ongoing yearly increases in CNP fraud.

"The industry needs to treat CNP fraud as seriously as it did skimming and carding. The industry should not resign itself to increasing rates of fraud just because online shopping is on the rise," Wilson said.

He cited the long term trend, with CNP fraud growing 38 percent each year on average, from $27 million in FY2006 to $189 million in FY2012.

Wilson added that CNP fraud was not a technologically tough problem.

"It's just the digital equivalent of analogue skimming and carding, and it could be stopped just as effectively by using chips to protect cardholder data online."

Last week a report by Ernst & Young found only 11 percent of the Australians it surveyed placed privacy and security in their top 10 'get rights' for online stores. Less than half (47 per cent) said they trusted Australian stores online more so than international ones.

However the APCA data reveals CNP fraud in Australia is growing as a percentage of overall CNP fraud, climbing from 35.5 percent in 2010 to 40.6 percent in 2012, as an increasing number of Australian retailers launch online services.

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