Fraudsters spare plastic money

Fake credit card fraud has cost banks in India just over Rs 1 crore in the last three years, even though the number of cards issued has grown by over 50 per cent to nearly 16 million during the period.

Six banks in India reported a total of 55 instances of serious fraud during 2002-05, according to information submitted to the Reserve Bank of India.

HSBC has reported 27 instances of fake cards involving fraud of Rs 41.04 lakh, while Andhra Bank's lone instance of fake card fraud involved Rs 19.50 lakh.

The Indian market has largely remained untouched by credit card fraud, which has proved to be a nightmare for bankers in more mature economies.

"In comparison, the UK has been forced to switch to chip-based technology due to fraud," B Madhivanan, general manager, ICICI Bank, said.

The UK lost $838.8 million in credit and debit card fraud last year, according to the UK payments association, Apacs. Malaysia, Japan, Taiwan, Australia and Hong Kong are also reported to have high incidence of fake card fraud.

In India, the nascent stage of the industry and low credit limits are the main reasons that hi-tech organised credit card fraud has not become a scourge.

Of all the credit cards issued in India, between 80 per cent and 85 per cent are active. This market is still three to four times smaller than Malaysia, another country, which is high on the credit card fraud list.

Bankers in India feel that with the average credit limit of Rs 10,000-Rs 20,000, Indian credit cards do not make an attractive business case for fraudsters.

The market regulator is not taking any chances. With the market witnessing rapid growth, the Reserve Bank of India has advised banks to set up internal control systems to limit fraud caused by counterfeit or stolen cards. In November last year, it asked banks to strengthen their appraisal systems.

Low incidence of fake cards has meant that the market for chip-based cards, which make cards tougher to fake, has not taken off in India.

Nearly all ATMs in the UK have moved to the chip and pin technologies. Japan, Taiwan, South Korea and Malaysia are in the middle of shifting to the chip technology.

Interception by courier companies and card or data theft by direct selling agents are the other means of credit card fraud.