Fraud's on the cards

I've always thought signatures were daft. Not the autograph book variety, but the ones you have to stick on credit or debit card receipts.

The signature I scrawl doesn't look anything like the best handwriting effort that's on the back of the card but this is meant to be the best available proof that I am the legitimate card holder. There's no photograph, no PIN number - the only hi-tech defence between this card and a ?3,000 spending spree are a couple of scribbles with a ballpoint pen.

So I'm always puzzled when people complain about the insecurity of buying goods over the internet with their credit cards. And it seems especially unreasonable when the same people are quite happy to give their details to a complete stranger on the phone. For all they know, when they're buying flights or cinema tickets, it could be the Crazy Temp from Hell on the other end of the line, about to begin a crime rampage using their credit card numbers.

But reasonable or not, online trading seems to cause anxiety among credit card holders, with an American Express survey showing that 73% of consumers have doubts about using credit cards over the internet.

"Our research shows that a significant number of people are worried about shopping online. By giving their card and other personal details to a 'faceless' retailer, they feel exposed," says head of credit cards Debra Davies.

In an attempt to assuage these fears, American Express is planning to upgrade online security with a card reader which will plug into their customers' computers. The credit card is inserted into this device, which along with a PIN number, acts as an electronic "key" that lets you use the card online.

But how great is the risk of our cards becoming the subject of a cyber-swindle?

Last year ?5m was lost in online card fraud, a little over 2% of the total for plastic fraud. Although this figure might rise there has been an "over-hyping" of the risk, says Richard Tyson-Davies of the Association for Payment Clearing Services (APACS).

While we might have night mares about teenage hackers trying to intercept our card numbers as we buy our groceries over the net, Mr Tyson-Davies makes the point that there are much easier ways of getting hold of credit card details for anyone so inclined.

In fact, while much of the worry is about transmission of card details, encryption has made this the safest part of the process. The vulnerable point isn't the machines that transfer data, it's dodgy human beings at the other end you need to worry about.

Among the online card scams that have been uncovered has been a website that can randomly generate the sequences of numbers and letters of genuine credit cards - with a pornographic website having been caught using these numbers to make fraudulent charges against credit card accounts.

This was a relatively small-scale fraud, but in an attempt to prevent more serious problems with bogus charges against cards, a number of organisations, including APACS, are working on the development of digital "signatures" which will authenticate the identities of online buyers and sellers. This is being driven at first by the need to confirm exchanges between businesses, but will filter down to consumers.

The biggest growth area in credit card fraud is the practice known as "skimming", where a card used in a restaurant or in a shop is copied and a counterfeit produced using the information. This cloned card is then used to buy goods until the real cardholder gets a statement showing that they've been leading a double life.

So in an attempt to block off this path, credit companies such as Barclaycard are putting silicon chips into cards that are much more difficult for counterfeiters to copy than magnetic strips.

But for consumers who still feel jittery about online shopping, the best security isn't a piece of gadgetry but the more practical offer of purchase protection, available from most major credit cards. If goods bought online fail to arrive or are broken, the credit card will cover losses. The Office for Fair Trading recommends that online shoppers should always use credit cards because of the protection they offer.

Finally, I don't want to stoke anyone's paranoia, but one e-commerce security risk that so far I've not had explained is what happens if your whole computer gets stolen. If you use a laptop for e-shopping (or online banking) will your card and banking details still be retrievable from the computer's memory? If your laptop has become an electronic wallet, should you cancel your cards when it's stolen?

Answers on a virtual postcard.

Email: coughlan-sean@hotmail.com