Samport

Credit and debit card fraud continues to undermine consumer confidence and threatens to hinder the development of a cross-border payments network in Europe, according to a European Commission (EC) report.

Even if it affects a minority of users, payment fraud still "undermines the general confidence in payments systems", says the study on the actions undertaken on prevention of payment fraud between 2004 and 2007.

Commenting on the report, EU internal market and services commissioner, Charlie McCreevy, says: "Payment fraud affects consumer confidence in non-cash means of payment and therefore remains a threat to the success of the single market for payments."

A study conducted for the Commission in 2007 shows that user trust in certain authentication methods for cashless payments could be improved. "Maintaining or enhancing user confidence does not necessarily require new legislation, but rather the commitment of the parties involved to achieve this goal," states the report.

Citing 2006 figures, the EC says there are 10 million fraudulent transactions in the Sepa area per year, affecting 500 000 merchants, representing roughly EUR1 billion in losses.

Although chip and PIN has resulted in a fall in some types of card fraud, there has been a corresponding rise in the level of card-not-present fraud mainly committed on the Internet.

The report says criminals have been taking advantage of gaps in the security procedures used by the payment industry and e-commerce sites when accepting credit card transactions. Not all merchants have been collecting card security codes, while payment card issuers have not systematically rejected transactions with false or no card security code, says the EC. The airlines/travel agencies and gaming/gambling sectors have been identified as "weak areas".

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Read the EC's report on payment fraud in the EU here>>

Source: Finextra, April 28th, 2008.