Retailers are being warned to expect an increase in online fraud as new initiatives to secure bricks-and-mortar transactions incent criminals to target other channels.
Credit card transactions in which customers are present are set to become far more secure after the Australian banking sector agreed to introduce chip and PIN technology in credit cards by early 2008.
Chip and PIN requires customers to enter their unique four-digit PIN number for on-premises credit card sales as they would for an EFTPOS or ATM transaction.
Carl Clump, CEO of fraud security specialists Retail Decisions, says chip and PIN technology is "very effective" at combating fraud where a card is present, as a signature is no longer good enough to authenticate a transaction.
He does not, however, expect fraudsters to "turn over a new leaf" just because their main channel has been effectively shut down.
"Fraud will simply migrate from card-present purchases to those transactions where the card is not present," he said.
He subsequently sees the potential for a large increase in fraud for purchases made on the Internet, interactive TV or via mail order.
When the UK banking community introduced chip and PIN technology to card-present transactions, there was a marked increase in "card not present" fraud, he said. He expects the same to happen in Australia in the next 12 to 18 months.
Clump said that the majority of card not present fraud is perpetrated by organised criminals who buy card details en masse from the perpetrators of database breaches at major organisations.
"Retailers need to protect themselves against the looming threat of card not present fraud," Clump said. "You can't just throw more people at it. You have to throw some technology at it."
A good deal of fraudulent transactions tend to occur around the Christmas period, he said, as fraudsters tend to act during high volume trading periods their transactions have a better chance of going unnoticed.
Clump said consumer electronics products tend to be among the most lucrative for online fraud.
"The sorts of goods brought fraudulently are those that can be converted into cash readily," he said. "There are lots of desirable electronic items -- mobile phones, iPods, portable gaming devices and laptops are extremely fraud-prone. We expect the iPhone to be a hot product for fraud."
