David Prosser: Shoppers should not pay for fraud

Good news and bad if you're a fraudster. Now that the roll-out of new chip-and-pin debit and credit cards is almost complete, it's much harder to counterfeit plastic. But don't despair - card fraud on the phone or the internet is easier than ever, so there's no reason for criminals to find an honest day job just yet.

The latest figures from Apacs, which runs the UK's payments system, show the introduction of the chip-and-pin system helped cut card fraud to £219m during the first half of the year, a reduction of 13 per cent on 2004. But within that total, "card-not-present" fraud - where people's card details are used to buy goods and services by post, phone or online without their knowledge - soared 29 per cent to £91m.

Apacs and other fraud-prevention agencies quite rightly say debit and credit card users must be much more careful about keeping account numbers and other information secret. That means destroying your receipts and sensitive paperwork, never letting your plastic out of sight and only buying stuff from reputable websites with decent security systems.

But I can't help feeling that neither retailers nor card issuers are taking enough precautions against this kind of fraud. For example, when I buy things online, I am now routinely asked for the three-digit security code printed next to my signature on the back of my debt and credit cards. But if a fraudster manages to pinch the numbers off the front of the card, I imagine he might just be able to take the one on the back too.

There must be a way of extending chip and pin to help prevent card-not-present fraud. Why can't internet-based retailers set up a secure way of asking for pins, for example? Something similar should be possible using the keypad on your phone. In both cases, retailers' computer systems already talk to your bank, in order to make sure you've got enough cash to pay for whatever you're buying.

Alternatively, we need more retailers to buy better fraud-detection technology. Companies such as Amazon already use sophisticated software to identify transactions likely to be fraudulent - other online and phone-based businesses need to follow its lead.

The danger for consumers is that the responsibility falls entirely on them to reduce card-not-present fraud. If so, some day soon, a bank or credit card provider is going to refuse to refund losses, on the grounds that the victim is to blame for the fraud.

The financial services sector already has an inconsistent attitude to fraud. Credit card companies are very good at setting aside the value of fraudulent transactions. While they're investigating, you won't be asked to pay the bill.

The big banks, on the other hand, all too often leave customers in dire financial straits. If your current account is raided by fraudsters, don't expect your bank to refund the stolen cash until it is satisfied a crime has been committed - even if that leaves you penniless for weeks.

n n n Nationwide's cash machine campaign is wide of the mark - the building society says consumers will pay £250m to take money out of ATMs in 2006, compared with nothing in 1999. But while that sounds bad, it's a product of the growth of fee-charging cash machines, not a decline in the number of banks offering free withdrawals.

There are currently 32,355 free ATMs in the UK, just 100 fewer than a year ago, so there is no question of non-charging machines disappearing. As long as that remains the case, the introduction of more fee-charging ATMs in shops, petrol stations and other outlets is to be welcomed. They're very convenient for those who don't mind paying, but there's no need to use them if you do object.