Department of Computer and Information Sciences, University of Strathclyde and Associates. The introduction of smartcard technologies has reduced the incidence
of card fraud in the UK, but there are still significant losses from fraudulent
card use. In this paper we detail the context of smartcard introduction and describe
the types of fraud that remain a threat to cardholders and other stakeholders
in the card system. We conclude with a risk analysis from the cardholders
perspective and recommend greater cardholder awareness of such
A recent report from the European Security Transport Association (ESTA) found that
nearly 20% of the adult population in Great Britain has been targeted as part of a
credit or debit card scam. As a result, the UK has been termed the Card Fraud Capital
of Europe , with UK citizens twice as likely to become victims of card fraud as
other Europeans. Plastic card fraud is a lucrative exploit for criminals and the proceeds
may be used to fund organised crime. Smart payment cards (Chip and PIN
cards) were introduced in the UK to replace magnetic stripe cards and support PIN
verification of card transactions. By the end of 2005, more than 107 million of the
141.6 million cards in the UK had been upgraded to smart cards . Levels of plastic
card fraud fell by 13% to 439.4 million in 2005  and again to 428 million in
2006 (Figure 1). The reduction has been widely attributed to the rollout of smart
cards with Chip and PIN authentication.
Card ID Theft. Department of Computer and Information Sciences, University of Strathclyde and Associates, Glasgow G1 1XH, UK
Identity theft occurs when a criminal obtains an individuals personal information and
uses this to open or access card accounts in that individuals name. A criminal may
use stolen documents such as utility bills and bank statements, or false documents, to
give the necessary documentation to open up a card account. Alternatively, they can
use key bits of personal information to take control of an account, perhaps arranging
for payments to be taken from the card account or by changing account address details
and requesting issue of cheques or a new card.
Likely Trends. Department of Computer and Information Sciences, University of Strathclyde and Associates, Glasgow G1 1XH, UK. Wilhelm  considered the future of credit and debit card fraud due to the introduction of smart cards and predicted a hybrid period of approximately ten to fifteen yearsduring which magnetic stripe and smart card technology would co-exist. In this period,fraudsters will get creative and exploit technology and social conditioning to devise
attacks on chip technology.
One of the highlighted concerns is allowing the use of the magnetic stripe as a
fallback where a chip fails to function. This permits fraudsters to circumvent a number
of the safeguards provided by smart card technology. This will prevent Chip and
PIN from fully addressing counterfeit card fraud made possible through the theft of
card details in transit or from lost/stolen scenarios. While the report predicts that a
significant reduction in card counterfeiting is likely to occur, it acknowledges that
while magnetic stripes are available, counterfeiting remains a viable option for fraudsters.
The report also highlights that fraudsters will focus their efforts on CNP fraud
and target merchants as a vulnerable link in the process.