Financial Crime World

Card Fraud on the Decline in Hungary

Despite an increase in value, card frauds committed with bank cards fell as a proportion of total turnover in 2002, both in the issuing and acquiring business. This improvement can be attributed to several factors.

Factors Contributing to the Decline in Card Fraud

  • Improved cooperation between banks and law enforcement agencies
  • Increased effectiveness of monitoring systems
  • Exchange of information between institutions and authorities
  • Use of SMS messaging to detect suspicious transactions and prevent further illegal use of cards

According to figures released by the Hungarian Central Bank, losses due to card fraud decreased significantly in 2002. While the total amount of fraud increased by 20% to HUF 189.2 million, this accounted for only 0.005% of acceptance turnover (cash withdrawals plus retail purchases).

Distribution of Losses

  • Fraudulent transactions using stolen cards more than doubled
  • Fraudulent transactions using lost cards increased by 150%
  • Fraud committed with counterfeit cards fell sharply by 32%

Responsibility for Losses

  • Hungarian issuing banks bore the majority of losses (87%)
  • Acquiring banks passed on 12% of losses to merchants
  • The remaining 1% was written off against assets
  • A shift is expected in the type of fraud committed, with an increasing proportion of losses likely to be incurred due to frauds linked to mail/telephone/Internet or those committed with cards not received.
  • Introduction of chip technology and PIN codes is expected to reduce counterfeiting and unauthorized uses of lost or stolen cards.
  • Migration to chip technology is set to continue, with deadlines for MasterCard and Visa brands in 2005 and 2006 respectively. This is likely to lead to a further decline in counterfeit card fraud.

Conclusion

While card fraud remains a concern, the efforts of banks and authorities have led to a significant reduction in losses due to fraudulent card use. The introduction of chip technology and PIN codes is expected to provide further protection against fraudulent activities.