A pilot program to beat Internet fraud that entails banks issuing every customer a hand-held credit card reader has been unveiled in the United Kingdom.
APACS, the U.K. payments association, will try out the next generation of fraud-prevention technology, which is designed to safeguard consumers when buying goods over the Internet, by telephone or mail order.
Fraudulent activity through these “remote” transactions, also known as “card-not-present” fraud, totaled about $186 million in the United Kingdom in the first six months of 2006.
That represented nearly half of total plastic card fraud losses of $407 million — making it the largest single form of plastic card fraud in Britain.
Under the proposed solution, banks would issue the card reader to each customer.
When buying something remotely, consumers would place their card in the reader and type in their PIN.
The reader would then generate a one-off pass code, which would be communicated to the retailer to verify the transaction.
The plan — which included participation by banks, retailers, trade associations and systems vendors — will start to be rolled out later this year.
Robert Kenley, head of credit cards at price comparison service moneysupermarket.com, said: “These developments are still in initial trials, and it will be interesting to see who will be the first to come on board.
“If it comes to fruition, this innovation will not only protect consumers, but also revolutionize the payment-card market.”
Total card fraud fell by 5 percent in the six months ending in June, according to APACS figures, and the body expects full-year figures, due out next month, to fall further.
However, card-not-present fraud rose 5 percent in the first half of last year, with online banking fraud surging 55 percent to 43.8 million pounds.
One year on from the official change over to chip and PIN in the U.K., almost all businesses have upgraded to the payment system.
More than 185 chip and PIN transactions take place every second, and Britain’s card companies have issued 138 million chip and PIN cards — 97 percent of those in circulation.