How banks are helping tackle card fraud

As you'll know, running a small business places plenty of demands on those running the shop, and if there's one thing we all want, it's a smooth payment process once our customers get to the till. Recently, however, you might have noticed an uptick in the amount of times your customers have been asked to enter their PIN at checkout.

Well, fortunately, we're happy to tell you there's nothing to be concerned about — for yourself, staff or customers.

So, what is happening?

Some customers are being asked by banks to type in a PIN code when making contactless payments more often than in the past. This is due to a number of factors, mainly driven by an increase in contactless card use — with 9.6 billion individual transactions taking place in 2020 alone — and the single-transaction limit raise to £100, which was introduced in October 2021.

The reason is so that both the customer and the merchants, like yourself, can be confident that the cardholder is present. So, though it may at first feel like an extra layer of friction is being introduced at the till, this security measure should actually reassure your customers in the long run.

If a customer carries out five consecutive contactless payments, they're likely to find that the fifth transaction is initially blocked — though this can be easily rectified by entering their PIN or inserting their card then inputting the PIN if the first method fails. Sometimes it may happen more frequently than this.

Introduced by the Financial Conduct Authority

It should also be noted that this new security measure has been brought in by the banking industry itself, specifically the UK's Financial Conduct Authority (FCA).

Known as strong customer authentication (SCA), the FCA rolled out this process in 2019, with all payment providers required to adhere to it from the March 14th, 2022 deadline.

Contactless continues to rise

Clearly, banks want to make sure people won't be afraid to pay with their cards, especially as contactless payments continue to make up a growing percentage of transactions at UK small businesses. In fact, UK Finance states that 83% of all UK customers use contactless payments, with such transactions making up more than a quarter of all transactions (27%) — rising from just 7% four years ago.

In addition to this they also, understandably, want to prevent card fraud, with UK Finance reporting more than £750m in fraudulent transactions during the first half of 2021 alone.

What else do banks do to protect customers from fraud?

The banking industry itself has tried to provide reassurance and information about how customers are protected against fraud in the past and have brought in this new measure as an extra safeguard against card fraud.

Other security measures banks use to verify purchases include:

• The now almost universally adopted chip-and-pin payment card
• Two-factor authentication (or 2FA), where customers must enter a one-time password (OTP) sent to their email address or code generated via a secure mobile app when making online purchases or sending money to a new payee
• Automatic real-time fraud detection and transaction screening using 'predictive analytics' and 'outlier models'
• Reaching out directly to cardholders before confirming a significantly large or out-of-character/suspicious payment (usually highlighted by the above systems)

Though perhaps slightly frustrating, modern measures are far more secure than simply asking for a signature, as was previously the case.

What should I tell my customers?

It's understandable for customers to perhaps be a little bemused the first time they encounter SCA, but by reassuring them that it's in place to protect them from fraud and has been introduced by the UK's own financial conduct regulator, should put their minds at ease.

What if I've got more questions?

As with anything new, it's natural to have questions. If you do, know that our friendly team is on hand to put your mind at ease — just give them a call on 01606 566 600.

And, as always, if you'd like to know more about the world of payments and how our products can make your life as a small business merchant easier, the takepayments blog has a dedicated section just for that.

John Ford

Copywriter