Australia's credit cards vulnerable

Recent credit card fraud has once again reminded Australians about the importance of crime prevention. Major swindles have forced several banks - including the Commonwealth Bank and Westpac - to cancel thousands of cards, causing serious inconvenience to affected cardholders. The fraud was believed perpetrated by a merchant whose acquiring bank is yet to be revealed. This gives us a troubling glimpse into the vulnerabilities that exist across the entire credit card system.Over the years, Australian banks have enjoyed low card fraud rates compared to the rest of the world. However, judging from the half-hearted efforts made here, compared to other countries – such as the United States and the United Kingdom, it is reasonable to assume such an achievement is more a matter of good luck than any actual serious fraud prevention strategy. Some say this situation is due to a perceived geographical advantage - being far from other credit card-savvy countries. This false sense of security has meant Australian banks adopted ‘‘chip and PIN’’ technology at a slower pace than many of their foreign counterparts, arguing that there was no need to rush into adopting the technology. In contrast, neighbouring countries, such as Indonesia and Malaysia, completed their national rollout of ‘‘smartcard’’ technology in 2005 and 2010 respectively. This was after years of astronomical losses from credit card fraud. With many other countries now fully protected from schemes such as ‘‘skimming’’ and counterfeiting, Australia is left behind as an attractive target for tech-savvy trans-national criminals. Significantly, perpetrating such frauds does not require the physical presence of an offender and thus victims can be anyone, anywhere, any time.Evidence suggests fraudsters are becoming much more organised. Therefore, a credit card fraud prevention strategy should be carefully co-ordinated to ensure resources are allocated efficiently and effectively. Such a strategy should cover areas such as fraud prevention policy ( central bank and card association policy covering merchant security standards), fraud awareness (consumer education), technology-based protection, identity management and harsh legal deterrence. Fraud prevention across these areas should be supported by all parties including consumers, institutions, card networks, government and industry. Like a disease, preventing fraud is better than ‘‘curing’’ it. Fraudsters will always refine their methods, so waiting until a strong business case exists will only mean greater pain.Further, non-financial losses should also be recognised, including the possibility that ill-gotten proceeds could be used to support terrorism and drug trafficking. On a positive note, however, banks could use better fraud prevention measures to attract more security-conscious customers and generate more, not less, revenue. In January 2010 the Illawarra Mercury published my article about credit card fraud in which I predicted Australia’s ‘‘luck’’ would soon run out. It appears my prediction may have been correct. It is time to take credit card fraud seriously.