An Abney Associates Fraud Awareness Program on Tap-and-go card fraud in Australia

Tap-and-go card fraud in Australia low: financial institutions

Tap-and-go card fraud in Australia is costing about 2¢ for every $100 of legitimate spending – half the rate of conventional card fraud, and a third of the rate of international card fraud, according to Visa.

And that's why Australia’s major banks, the Australian Payments Clearing Association and cards issuers such as MasterCard and Visa have been left scratching their heads over suggestions by the Victorian Police last week that there is a runaway increase in theft and fraud associated with contactless payment cards. They all claim that is at odds with their experience.

A meeting of the Fraud in Banking group, which brings together financial institutions, regulators and police forces from around Australia, is scheduled to be held later this week in Melbourne, when the topic will again be raised.

What sparked the controversy was the release last week of Victoria Police statistics which revealed a 45 per cent increase in deception cases. The police said most of that increase was due to misuse of tap-and-go cards with thieves specifically seeking the cards in car and home burglaries.

Victoria Police has been contacted for further comment.

Visa’s senior director of risk services, Ian McKindley, said the company monitored card fraud internationally, adding that the Australian rate of card fraud in face-to-face (not online) transactions was one of the lowest in the world. He added that the rate of contactless fraud was half that of other cards despite 45 per cent of all face-to-face card transactions in Australia now being contactless.

Mr McKindley said that after removing internet fraud (transactions knows as card-not-present are a bigger financial fraud problem for the banks) the Australian cost of fraud using conventional cards was 4¢ in $100, contactless was around 2¢ in every $100, while the global figure is 6¢ in the $100.

Not only was the cost of fraud lower, criminal gangs had been unable to counterfeit the contactless cards, he said, alluding to the active underground market for stolen credit cards and payment details.

Mr McKindley said that Visa had been liaising with the Victorian government over its concerns since September.

Unlike most other states and territories in Australia, which simply record any reports of card theft at local police stations, in Victoria copies of reports of card theft are provided to issuing banks, which investigate the cases in place of Victoria Police.

Police forces were, however, alerted by the banks and card issuers if there was evidence of possible criminal gang activity in a particular area.

Australian Bankers’ Association chief executive Steven Munchenberg agreed that contactless card fraud levels were low.

“These cards use the same intelligent systems that look for stolen card activity to identify possible fraud on customers’ cards. This helps prevent fraud if the systems believe your card has been stolen. As is the case with credit cards, the bank may contact the customer to check that a transaction is legitimate. If a customer cannot be contacted, a staff member will decide whether to block the card until the bank can talk to the customer.”

Consumers who are issued with contactless payment cards are not yetable to disable that function, which was one of the concerns raised by Victorian Police and consumer protection bodies. However eftpos Australia, which is developing its own contactless payment card and smartphone app, is still deciding what limits it will set for contactless transactions (it may be lower than the $100 limit on the major cards) and whether it will allow users to turn off the tap-and-go function.

While the ABA was unable to comment on the extent of smartphone-based tap-and-go payments fraud, the still relatively low penetration of mobile payments apps coupled with the fact that many are secured with a PIN, suggests this is less of an issue for the banks and card issuers at present.

APCA CEO Chris Hamilton welcomed any efforts to reinforce the need for consumers to treat payment cards or apps with the same care as cash, but said APCA’s own statistics had not revealed a sudden surge in contactless card fraud.

However, he noted that the rise of chip and PIN cards, and the planned move away from the use of signatures to complete payments, was perhaps forcing an “opportunistic” change in criminal behaviour. Chip and PIN cards “shut down counterfeiters and skimmers” he said, which may have prompted a rise in direct card theft.

That had also been seen in other markets, such as Britain, when chip and PIN were rolled out, he said.