Credit card fraud booming in Australia

By Vanessa Tripodi

Wherever there is money involved, there is bound to be someone there trying to steal it, which is why it is no surprise that credit card fraud is costing Australians over $120 million a year. In 2008, credit card fraud fell into two main groups. Counterfeit credit cards cost Australians $49 million, while card-not-present (CNP) credit card fraud cost $71 million, including fraudulent mail, telephone and Internet transactions.

Australia is one of the latest countries to introduce chip-and-PIN technology to combat credit card fraud. In the UK, Europe and Asia, chip and PIN has been part of credit card transactions for many years; in Australia, they were only introduced in June 2008. As a result, Australia is one of the top five countries to have seen a steady increase in the use of fraudulent UK credit cards, according to a report, "Fraud: the Facts," from APACS, a UK payments association.

The APACS report shows Australia in the top five countries where fraud is being committed with UK credit cards in 2005, 2007 and 2008. UK authorities have seen a significant decrease in credit card fraud since the introduction of chip and PIN technology. However, CNP transactions such as Internet, phone and mail order transactions are still not entirely free from fraud.

In 2008, Australia already had a high CNP credit card fraud rate. It is feared that this country's credit card industry will follow that of the UK, where card-present transactions are more highly protected, but credit cards and bank balances are still at risk in other areas. In Australia, it is not mandatory to use your PIN when finalising a credit card transaction. In fact, very few retailers have yet to adopt payment terminals that use the information in a chip-based credit card.

Simon Greig, who has been contracted by the Australian credit card industry to manage the introduction of the Pen or PIN initiative, has said that the main benefit of the transition has always been ease of use rather than security. Unlike much of Europe, Australia has been using PINs for their card transactions since the 1970s, and the transition has been fluid.

Unfortunately, the introduction of PINs for credit cards in Australia could even see an increase in the fraudulent use of these cards, said Consumer Action Law Centre Director Gerard Brody. Brody says, "The risk might be consumers will make their PINs all the same or write them down," as there are only so many different numbers people can remember. The chip in credit cards is another security matter, however, as the chip is much harder to forge and is expected to result in fewer counterfeit credit cards being used in Australia.

The introduction of chip and PIN technology does not mean that Australians are safe from ID theft, as fraudsters are still able to steal your personal details, especially during an ATM transaction. Card skimming machines are physical devices attached to ATMs that record a user's PIN. This is either done with a pinhole camera attached to the machine, or with a Bluetooth keypad device that directly transmits the numbers you enter. While you can cover the keypad to protect yourself from cameras, if you notice anything out of the ordinary about your ATM, choose another machine or use in-store electronic funds transfer at point of sale (EFTPS) services.

This means more secure point of sale authorisation needs to work in conjunction with technology initiatives such as the ANZ Bank Falcon which is able to identify anomalous credit card transactions based on your spending history. Falcon is so successful that it has even been able to identify fraudulent credit card use before the owner of the card even realised their card was missing or their bank balance was diminishing.

Article by Vanessa Tripodi

Published: October 16, 2009