Fincrime has increased at an alarming rate, across the globe, but especially in the UK over the past year. The UK is one of the top three EU countries with the highest attempted fraud levels during the pandemic, as over £150.3million has been stolen from bank accounts. With lockdown measures easing, the necessity for people to safe and secure when using their contactless cards is of the utmost importance.
As the contactless payment limit has increased to encourage more contactless spending, and avoid the spread of covid-19, there is a higher chance for fraudsters to take advantage of any details they may acquire. Paul Marcantonio, Executive Director at ECOMMPAY, has over 20 years of experience working for representatives of the payments industry, including popular e-wallets, and tier-1 interactive gaming brands, such as Ubisoft and THQ. He had this to say on rising fraud levels during the pandemic and the future of contactless payments:
In March 2020, shoppers and retailers were encouraged to adopt contactless payments in order to reduce the touchpoints in a transaction, in an attempt to stop the spread of covid-19. Under this advice, the contactless payment limit was increased from £30 to £45 in April. As a result, more than half of all debit card payments in the UK last year were contactless. In the March 2021 budget, Chancellor Rishi Sunak unveiled a new limit of £100 on a single payment using contactless card technology.
With rapid changes, mistakes can be made, and cautionary measures fall through the cracks. Unfortunately, cybercriminals have adopted a “never let a good crisis go to waste” mentality throughout the pandemic, with a notable rise in online fraud being seen during successive lockdowns and a total of £150.3million being stolen from bank accounts. So, is the new contactless payment limit safe or will it leave consumers vulnerable to fraud? What steps can be taken to safeguard against any malicious online activity?
A look at fraud and covid-19
According to ECOMMPAY’s transaction data, the UK is in the top three EU countries with the highest attempted fraud levels. Fraudsters are increasingly sophisticated, able to capitalise on the uncertain climate we find ourselves in due to covid-19, where business errors and attempts to increase conversion by loosening antifraud filters has often opened the door to criminal activity.
Certain demographics are particularly vulnerable to criminals exploiting their newness to digital channels. People under 25 are 84% more likely to be targeted than those aged between 25 and 35. It is imperative that at-risk segments of the population, such as the elderly, as late adopters of online payments, are protected as new payment technology becomes ever-more present.
What is the risk associated with contactless payments?
Without increased authentication, there have been long-standing concerns that criminals could easily use stolen cards to go on unlimited shopping sprees. Starling Bank has in fact said that it will not automatically increase its limit on contactless payments to £100 out of concern for the fraud risks.
Card fraud is also increasingly popular amongst criminals as fraudsters are able to double their earnings by selling card data on the black market. Indeed, schemes involving fraudsters buying and selling stolen payment cards on the dark web increased by 34% across industries in the third quarter of 2020.
Consumers will therefore need time to adjust to the new limit and its associated risks. This is particularly true of those older shoppers, who have greater concerns that contactless payments are not secure, and are also at greater risk of fraud.
How contactless payments can be safeguarded
That being said, contactless payments are far from being a lost cause. With non-essential retail reopening on the 12th of April, contactless options will be essential to boosting consumer confidence whilst the population awaits their covid vaccines. Contactless is the surest way to reduce touchpoints by which covid can be spread, and minimising this risk will be essential to the high street’s recovery. Similarly, the seamless and rapid payment experience, which is at the very heart of contactless methods, remains highly appealing, and has been linked to a higher spend in stores. This will provide retail and hospitality with a much-needed boost.
In the first half of 2020, people spent £41billion using contactless payment methods. The fraud losses of £8.2million are minute when considered within this bigger picture. Although this sum could proportionally increase with the £100 limit, education around fraud, as well as proactive and reactive protection measures, will help mitigate its impact.
Technological developments have helped secure contactless card payments. For instance, most apps have easy options to immediately freeze stolen cards. Innovations in this field will only accelerate.
Likewise, compliance and financial intelligence teams must adapt to the surge in contactless payments. Due to the increased volumes of contactless transactions, spotting fraudulent activity becomes a mammoth task. And, with the re-opening of non-essential retail, this workload will likely increase. But, being vigilant cannot take a backseat.
Using trusted payment providers that have effective checks in place will help assuage the anxieties of businesses and consumers. These could include risk control systems based on machine learning and accompanied by manual transaction monitoring made by risk control experts. Fraud-filters configuration can also provide barriers to fraudsters.
Digital wallets are here to stay, and more than that, they will be essential to the economy’s post-covid recovery. But it is imperative that businesses, consumers and payment providers remain vigilant against the efforts of sophisticated fraudsters.
The fintech and banking industry need to combine their efforts to educate both businesses and the end-consumer to reduce the level of online and offline fraud. There are international initiatives emerging to help financial institutions share their fincrime-related information, allowing them to become more effective against fraud.
These measures will be foundational to building a seamlessly integrated retail sector, invaluable in modernising the UK’s high streets.