Fraud 'handcuffs' banks

This is one of the key findings in a new international study on bank fraud in Africa, Europe and the Middle East, commissioned by First Data international and conducted by independent research firm Olive insight.

The study is based on the experiences and opinions of 52 senior fraud experts and related to automatic teller machines (ATMs), points of sale (POSs), online banking and card not present (CNP) fraud.

More co-operation needed

Jackie Barwell the director of fraud management for Europe, the Middle East and Africa at First Data International says the fraud experts participating in the study clearly recognise that fraud is a global phenomenon demanding a global response.

"At the same time, it is a sensitive subject for banks concerned about reputation, competitiveness and profitability. Banks acknowledge the importance of working together and with other agencies to combat fraud but they are not yet sharing data at a level that will make a real difference to the struggle."

One respondent stated: "Organisations are secretive of fraud losses and that inhibits our ability to work together."

Data protection legislation is seen by many banks as a significant barrier to industry co-operation, although European data protection experts at a recent First Data forum suggest that the problem lies more in perception and understanding than in the realities of the current legal framework.

Regulation 'can be a straitjacket'

While 55% of respondents believe that regulation helps to combat fraud, others, especially in Western Europe, are concerned that regulation may prove too restrictive in a rapidly changing environment.

In a statement, Katy Worobec, the head of fraud control at APACS, the UK payments association, said: "Regulation may not allow for the changing face of fraud and may not incorporate the flexibility necessary to meet new developments. Fraud changes and migrates too quickly to have inflexible legislation around it."

New frauds a concern but technology is a key weapon

The study found that banks are most concerned about new and emerging frauds.

While ATM and POS frauds are more prevalent - and more expensive - today, online fraud is a real problem across Western Europe and a significant threat elsewhere in the region, where internet usage is expected to rise.

Online banking fraud offers the perpetrator the capability to defraud more people, more quickly, and reduced personal risk. Thirty-eight percent of respondents report an increase in phishing attacks and over a third are seeing more online CNP fraud.

Technology is a key weapon in the fight against fraud and a clear priority for over 50% of respondents.

Many organisations are introducing anti-skimming devices and improving security at ATMs, while innovative ways of analysing data are under review and need further exploration.

First Data says banks need to evaluate technology implementation costs in the light of both financial losses from fraud and its impact on consumer confidence.

It is working with banks and merchants to implement the most up-to-date fraud solutions, with members of its fraud working group located across Africa, Europe and the Middle East to ensure that banks have a deep understanding of frauds operating at a local level, and can apply global fraud management capabilities to the benefit of clients.