Card Fraud in Europe

Credit and debit card fraud in the U.K. reached new heights last year. Moreover, "the picture is expected to deteriorate further during 2000 and beyond" according to an article in the European Card Review. The experience for the past three years is shown in the accompanying table.

Losses are likely to continue while the industry distributes more smart cards and the technology to support their use. A key need is to persuade cardholders to be willing to enter their PIN at the point of sale. A significant portion of the fraud arises from "skimming" by fraudsters who capture data from a genuine card and then enter it on a blank card. U.K. researchers have also been considering biometrics to identify cardholders. Credit card issuers are wary of demanding PINs for fear that consumers would switch to debit cards rather than memorize one more identification number. The trend in usage is already tilted against credit cards. The compound annual growth rate in volume, 1996 to 1999, was 20 percent for debit cards and 14 percent for credit cards. In 1999, debit card volume was £64.5 billion vs. £70.3 billion for credit cards.

Eastern Europe has also had its fraud problems, though not in the volume found in the U.K. and elsewhere in Europe. Last year a hacker broke into the database of an on-line music retailer, CD Universal, and stole some 300,000 ID numbers. One reason for broader concerns is the high level of unemployment in Russia. With many computer-scientists out of work, they have to find something to do.