Saturday, January 10, 2009

The Never-Ending Battle

No industry observer is surprised by the reported rise in fraud committed abroad on UK cards.

The perverse effect of harder-to-crack chip card technology is that fraud increases where chip cannot be used, by using cards with information obtained by skimming or other ways obtaining the information located on the mag-stripe on the back of the very same chip-card. Fraudsters, seeking the path of least resistance, gradually move to next safe haven to exploit the opportunities where chip has little or no impact.

One of them is the internet, leaving ample space for fraudsters to conduct their lucrative business. Although card issuers and acquirers deploy ever more sophisticated verification methods, there is still room for business growth, unfortunately, for fraudsters.

The other alternative is to move abroad. Although the card industry is finally gaining momentum in implementing chip technology, there are still large white spots on the map of chip-reading POS-terminals. Mag-stripe only POS terminals in combination with collusive merchants or below-the-floor-limit transactions are still among the simple but effective ways of fradulent activity.

Some may think that I am pessimistic on behalf of the card industry regarding its ability to curb fraud. I am by no means pessimistic, just vigilant. Card fraud is like squeezing a balloon. Squeezing one part of it will automatically result in the balloon bulging out elsewhere.
Which is why the industry needs to be in the frontline of this never-ending battle. But I am afraid we will receive numerous reports of the sort for years to come.

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