A new form of credit card fraud

CHIP and PIN, Visa and MasterCard SecureCode and PCI-DSS for the safe storage of customer credit card data, are just some of the tactics deployed in the ongoing battle against credit card fraud.

All of these measures have had mixed success and while they may have helped reduce card present fraud, card-not-present fraud is on the increase particularly in online shopping and cross-border transactions.

A new form of credit card fraud called "first-party fraud" is also emerging and experts say it could cost banks and other card issuers up to $21 billion in losses this year. Instead of fraudsters stealing customer credit card details or trading credit card numbers in underground communities, "first-party fraud" involves people using false income and financial declarations to apply for a credit card, which they intend to use and never repay.

Banks typically treat these applications as bad debts and only discover much further down the line that instead they may be dealing with fraud. Lafferty Group estimates that "first-party fraud" losses this year were $15 billion for the US, $2.5 billion for Asia-Pacific, and $2.2 billion for Western Europe.