Banks ‘shift liability’ over fraud prevention

UK High Street banks stand accused of over-complicating systems and alienating customers in their attempt to clamp down on card-not-present fraud.

Banks 'shift liability' over fraud prevention

Currently, the UK payment association APACS is trialling a new scheme where online shoppers put their credit or debit card into a special card reader that would generate a one-time passcode to authenticate the card and transaction.

But the CEO of fraud screening company the 3rd man, Paul Simms, said many retailers deal with fraud and manage the threat with ‘little or no impact on their genuine and honest customers.’

Simms said that these card readers were another attempt by financial institutions to shift liability for card-not-present fraud from the banks onto the customer.

‘The cardholder who had virtually no liability with card not present fraud will now be at threat if password or authentication details are compromised – and that is exactly what the fraudsters will seek to do,’ said Simms. ‘Furthermore the key to preventing card not present fraud lies with the retailers who now will only care about receiving fully authenticated orders.’

He said that such card readers are a much stronger solution but its weakness is it requires complete adoption by customers. ‘As long as there are banks who do not support it, or cardholders who don’t have one of the little gizmos, then retailers will still need to make judgement calls, just like they do today,’ said Simms.

He added that bank led initiatives are all useful in preventing fraud but the justification to implement must be made based on the discounted rates that the banks have agreed to give retailers as inducements.

‘Negotiate a better fee on the basis of improved security. Retailers must remember that alone these measures will not solve card not present fraud,’ he said.

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