Online retail boom sees credit card fraud soar

The Australian Bankers’ Association has issued a stark warning to merchants and consumers over payment fraud, with new data showing credit card fraud is surging as online retail booms.

ABA chief executive Steven Münchenberg said criminals are constantly seeking out new opportunities to defraud, and the rise of online retail provides an ideal platform for them.

“As technology advances and customers’ payment patterns change, so too does criminal behaviour,” Münchenberg said in a statement.

“That’s why criminals are seeking to defraud customers online – because so many of us are shopping on the internet.”

Münchenberg’s comments come on the back of new payments fraud data from the Australian Payments Clearing Association, which paints a grim picture for merchants and consumers.

According to APRA, the number of fraudulent financial transactions rose from 834,684 in December 2010 to 1.15 million during the 12 months to December last year.

The total value of fraud transactions rose from $223 million to just over $300 million.

Unsurprisingly, cheque fraud rates fell from 1.3 cents to less than 1 cent in every $1,000 issued, while the incidence of cheque fraud fell to around one in 300,000 transactions.

Proprietary debit card fraud also fell significantly from 7.9 cents to 4.9 cents in every $1000 transacted. The incidence has also decreased to 2.5 from 1.3 in every 100,000 transactions.

However, scheme credit, debit and charge card fraud increased from 67.2 cents to 96 cents in every $1,000 transacted. The incidence has risen from 38.4 to 51.7 in every 100,000 transactions.

Alarmingly, more than 70% of fraud cases involved “card-not-present” transactions, in which the cardholder and retailer do not meet face to face, such as online or over the phone.

Münchenberg said dealing with card-not-present fraud requires vigilance from everyone involved in the transactions, including banks, other payment providers, retailers and consumers.

“The focus is not just domestic because a lot of the transactions are being done offshore via the internet,” Münchenberg warned.

Locally and internationally, Münchenberg said banks and card schemes are working with online retailers to implement additional security measures.

“These services are free and provide added security when you shop online by providing added protection against unauthorised use of your bank-issued MasterCard or Visa credit or debit card,” he said.

“If banks identify a suspect transaction, they will usually try to contact the customer to confirm the transaction.”

“If the customer cannot be contacted, a staff member will decide whether to block the card until the bank can talk to the credit card holder.”

Münchenberg said consumers should always be careful when purchasing from online retailers, highlighting the importance for retailers to ensure their sites are secure.

“Before making a purchase, it’s important that you do some research on the merchant, so that you can be confident that you are transacting with a business that you can trust,” he said.

Australians are among the heaviest card users in the world, according to figures from the Reserve Bank, making more than 152 million card transactions a month.