Guru Speak: Moving to prevent card fraud

Banking transactions are no exception, with the use of ATM, credit and debit cards playing an increasingly integral part in our daily lives.

Cards undoubtedly offer a convenient payment method for consumers, but they do carry risks. F fraud and misappropriation can take a number of different forms, including fake websites, theft, pick-pocketing, phishing, skimming and other more subtle forms of fraud.

The use of stolen cards and identity theft costs cardholders and issuers hundreds of millions of dollars each year. Certain frauds may damage the reputation of a business or bank, and impacts can be severe. Financial institutions must place great importance on monitoring fraud, both internal and external.

They should establish a fraud-prevention unit with a clear and proactive role, covering the following:

On a positive note, recent statistics reveal fraud involving credit cards is declining as new technology - eg, chip cards to replace magnetic strips - have made it more difficult to copy data. With financial institutions increasingly alert to fraud and tightening security standards, Thailand no longer tops the fraud charts, with losses amounting to no more than 0.03 per cent of transactions.

However, fraudulent cards from Thailand do still turn up, both locally and abroad, a situation that should be closely monitored. Anywhere from 20-25 per cent of fraud involves cash withdrawals, and about 10 per cent the unauthorised use of personal and card data obtained via the Internet, phone or regular mail.

Compared with credit cards, fraud involving debit cards or ATM misappropriation tends to be higher in dollar terms, since ATM transactions and volumes are typically greater. Misappropriation involving ATM withdrawals requires a complicated investigation process to prove whether transactions were legitimately performed by cardholders. Sophisticated criminals have even installed small electronic devices in ATMs to skim information or steal PINs using hidden cameras.

Preventing fraud and counterfeit transactions requires strong determination and awareness by banks. They must watch for suspicious behaviour and develop effective monitoring systems capable of recognising characteristics or patterns that may indicate fraudulent transactions. With organised criminals being a major contributor to the rise in card fraud, partnership between banks, police and retailers has become increasingly important.