Annual Report 2016

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THE UK CARDS ASSOCIATION

What we do

The UK Cards Association provides a dedicated representativevoice for the card payments industry. Through engaging on behalf of our members with partners and stakeholders, we striveto ensure the UK card payments industry works as effectively as possible in the interests of consumers and retailers.

Our priorities for our

members are:

Promoting good outcomes for consumers through choice and transparency

We aim to support UK consumers’ interests and to improve the payment experience for individuals andbusinesses using cards. We encourage consumerchoice and competition by championing transparencyin the card payments market, helping consumers tomake the right choices. We also work with regulatorsto inform them how the market operates, so that regulation is relevant and proportionate.

Ensuring consumer protection, with extra support for vulnerable customers

We ensure responsible lending is at the heart of the industry. We work closely with partners in the debt advice sector to improve outcomes for consumers, including through evaluating evidencefrom the market and commissioning research. Inparticular, we facilitate the development of industrybest practice aimed at helping consumers who experience problems with repayments.

Facilitating payments innovation

As card and card-like payments develop and evolve, we act as a facilitator for industry innovation,bringing together new and existing providers in a non-competitive environment. At the same time,our experts deliver certainty on payments standardsand integrity to ensure that consumers can use products everywhere, at any time, and that security is never compromised. We work with UK and European bodies in developing technical standards and manage accreditation of terminals and other products.

Providing leadership in fraud management

The UK Cards Association works in partnership withFinancial Fraud Action UK (FFA UK) in developingand delivering the fraud strategy on credit, debitand charge cards.

FFA UK supports major external operations,including the Dedicated Card and Payment CrimeUnit (DCPCU), a specialist police unit with a recordof £476m of fraud savings. FFA UK also providesthe mechanisms through which members canshare fraud intelligence, and delivers education and awareness campaigns to warn consumers ofspecific threats.

Association Board Members(as at December 2015)

American Express Services Europe Ltd

Bank of Ireland

Barclays Bank Plc

Capital One (Europe) Plc

Clydesdale Bank Plc

Co-operative Bank Plc

Elavon Financial Services Ltd

Global Payments UK LLP

HSBC Bank Plc

Lloyds Bank Plc

MBNA Limited

Nationwide Building Society

NewDay Ltd

The Royal Bank of Scotland Group Plc

TSB Bank Plc

Santander UK Plc

Tesco Personal Finance Plc

Vanquis Bank Limited

WorldPay (UK) Ltd

Other members

AIB Group (UK) Plc

C Hoare & Co

Citibank UK

Coventry Building Society

First Data Europe Limited

Investec Bank Plc

Metro Bank Plc

Northern Bank Ltd*

Sainsbury’s Bank plc

Standard Chartered (Jersey) Ltd

Virgin Money Plc

Yorkshire Building Society

*Danske Bank is a trading name of Northern Bank Limited

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ANNUAL REPORT 2016

Contents

What we do...............................................................................................2

Contents & Highlights of 2015 .............................................3

Chair & CEO introduction..........................................................4

Promoting choice and competition ................................6

Ensuring consumer protection............................................8

Facilitating payments innovation..................................10

Contactless transit focus piece ........................................12

Fraud prevention..............................................................................13

Communications and charitable giving..................15

Highlights of 2015

Launch of contactless transit projectwith card payment and transit industries working to expand contactless ticketing in the UK

UK Cards co-hosts Founders Forumaiming to facilitate the multichannelaspirations of retailers

Launch of UK Cards pre-electionmanifesto, calling for key changes tosupport the card industry to furtherimprove their offer to consumers

The Payment Systems Regulator(PSR) is launched, announcing aworkstream on card payments and interchange fees

UK Cards hosts debt advice roundtablewith its members, StepChange andother debt charities

UK Cards hosts summer receptionwith Lord McFall, former chair ofTreasury Select Committee, and publishes guide on travellers usingcards overseas

Apple Pay launched as the first harmonised smartphone EMV solutionfor face-to-face and in-app purchasing

UK Cards publishes contactless andhigher value payments guide for retailers

The contactless limit as agreed by UK Cards rises to £30. PSR launches its Payment Strategy Forum to encourage innovation in the industry

UK Cards at Conservative Party Conference event on the changinglandscape of debt and employment.TfL mandate card payments in London taxis

FCA publishes interim report on theCredit Card market study, leading tocontinued work on potential remedies by UK Cards

UK Cards hosts event to show MPscredit profiles on their constituencies.Explains the impact of the Interchange Fee Regulation on payment card rates to retailers

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THE UK CARDS ASSOCIATION

A message from the ChairMelanie Johnson

A central role for any trade association is to assist the industry it represents in navigating change and helpingready it for the future. We havealways done this by focusingon customers’ needs.

The card payments industry has an exemplaryrecord of adapting to changing customer needs and embracing new regulatory requirements. Thisyear has been a prime example, and I want to focus on two significant areas where The UK Cards Association provides this service for our members.

Last year I reported on the Financial Conduct Authority’s (FCA) market study of the credit card industry. The FCA published their interim report inNovember 2015. Since then we have worked withour members, the industry and the FCA to analyseand respond to the regulator’s initial findings andproposed remedies. The study is important and wewere pleased that it found credit cards work well forthe vast majority of customers, with a healthy levelof switching. It also identified some issues wherethe FCA believes change may be needed.

It is essential that consumers get a fair deal and theindustry has a considerable track record of providingsupport to customers who may find themselves indifficulties. We are now leading the engagement between the credit card industry and the regulatorin developing final remedies that are carefully considered, proportionate and will best achievetheir intended objective.

The payments industry is going through a period of intense change as innovations enter the market.Our work has shown that, far from being a threat,these developments instead provide huge potentialfor the card industry to deliver great products andservices that are relevant and helpful to consumers.

We are building on the huge success of the roll-outof contactless payments on the Transport for London network to develop a framework supportingthis technology for different transport systemsacross the United Kingdom.

Transport organisations have embraced our work and Department for Transport ministers havepraised the project’s progress in this notoriouslycomplex area. There has also been a positive reaction across the country to our promotion of contactless ticketing. The Northern Irish, Welsh and Scottish Governments have all shown a keen interest in an open, non-proprietary smart ticketingsystem based on contactless cards. We continue to work with all parties to help them and their customers.

Change is a constant, and over the year ahead wewill continue to make sure that, through The UKCards Association, the card payments industry has a significant voice in the debates affecting our members and the customers they serve.

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ANNUAL REPORT 2016

A message from the Chief ExecutiveGraham Peacop

This has been a busy and productive year for The UKCards Association which hasseen us continue to supportour members in the card payments industry as they innovate and strive to improvecard payments for their customers.

One of the highlights of the year was the exponentialgrowth in the use of contactless payment cards.The UK Cards Association facilitated the increase to£30 of the cap on contactless cards and this newlimit, delivered in September 2015, continues tofuel the use of cards. Our work shows how the industry working collaboratively through us can deliver significant benefits for customers.

At the end of 2015, The UK Cards Association published a report which illustrated how the world has changed through a decade of payments data.Nowhere has this change been more evident thanin the move to online payments. Card paymentshave facilitated the transition to a digital economybut this is a rapidly evolving world and we are determined to help our members stay on top of further changes as they emerge. That is why we co-organised an event early in 2015 with some ofEurope’s leading digital and technology entrepreneursthrough the Founders Forum on the future of payments. It provided an invaluable opportunity for the card industry to understand how retailers’needs are changing and how they might respond.

The past year has also seen positive developmentsin the way the card payments industry tackles financial fraud. The UK Cards Association has longbeen proud to be the main sponsor of FinancialFraud Action UK (FFA UK), which leads the collectivefight against financial fraud on behalf of the UK payments industry. We supported the incorporation

of FFA UK as a new independent organisation andlook forward to building on our close relationship.

Finally, during 2015 the future of trade associationsin the financial services industry has been under review. In December, Ed Richards, who conductedthe review, recommended that we, along with otherassociations, should be ‘integrated to create a newFinancial Services Trade Association’.

The companies that make up the membership ofour association are considering how they respond to the report’s recommendation. Meanwhile, TheUK Cards Association remains wholly focused oncontinuing to support all our members in deliveringbenefits for the consumers and retailers who usecard payments.

Throughout 2015 my team and I have been focussed on ensuring the industry’s views are heard and our positive agenda for the future is understood. I am proud of what has been achievedin the past year. We remain committed to continuingto deliver constructive, improved outcomes for allthose who use card payments.

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Promoting choice and competition

One of The UK Cards Association’s core roles is helping the industry deliverhigh levels of choice and competition while ensuringsimplicity and securing goodoutcomes for customers. These have been prominentthemes this year as we havesought to mitigate the potential that excessive regulatory intervention couldhave on business models and profitability, impact on productdesign and so have a knock-oneffect on consumer choice and resultant competition between providers.

FCA market study – the impact forcredit card consumers

Throughout the year, UK Cards has spearheadedwork with our members to help guide the design of the research and analysis components of the Financial Conduct Authority (FCA) credit card marketstudy. We maintained intensive engagement with the FCA at an executive level and with the marketstudy team, providing crucial insight into the importance of the industry, its key metrics and its track record of delivering positive change in the interests of its customers.

The interim report, published in November, found that:

• Firms compete strongly for custom on some features, offer a range of products to meet consumers’ needs and there have been new entrants in the market in recent years.

• Consumers shop around, switch and value the flexibility offered by credit cards.

• Firms are not targeting particular groups of consumers in order to cross-subsidise others.

• Consumers in default are extremely unprofitable and firms are active in contacting consumers who miss payments, triggering forbearance at this point. However, consumers with persistent levels of debt or who make minimum payments are profitable; firms therefore have fewer incentives to help these customers.

The FCA asked UK Cards to play a key leadershiprole in developing a package of agreed remedies to practically and effectively address its concernsaround certain features of the credit card productand the way in which certain consumers use them.It is a role we are wholeheartedly committed to.

UK Cards has engaged with relevant academicsand research organisations to better understand the highly complex research underpinning the interim report, to build a fuller understanding of the identified problems and how the initial potentialremedies might address these. We made our formalresponse to the interim report in January 2016 and are continuing to work closely with the FCA to develop measures that deliver tangible andmeaningful improvements to customers. Our response is seeking to build on the historically progressive work across firms in this sector to provide tangible support to customers and helpthem to make the best possible choices.

Interchange fees and engagementwith retailers

A major priority for UK Cards has been engagingwith HM Treasury and the Payment Systems Regulator (PSR) on the European Interchange Fee Regulation (IFR). Interchange fees are not paid directly by consumers but are exchanged betweenretailers and card companies to share the cost of maintaining the card payment infrastructure. Following concerns around competition, the European Commission proposed caps for interchangefees during 2013 which were voted through the European Parliament in 2014 and came into effectin the UK on 9 December 2015.

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ANNUAL REPORT 2016

However the regulations also raise wider implementation issues which will affect how retailers accept card payments.

The card industry was concerned that implementingthe IFR in the UK could be unnecessarily disruptive.Along with responding to the HM Treasury consultationwe therefore engaged with them and the PSR tohighlight the potential effects of inappropriatechoices as they developed the implementation regulations for the IFR in the UK. The Treasury’sfinal response, published in October 2015, confirmedcredit card transactions would be capped at 0.3%.We were pleased that this not only remained in linewith the European default caps but also that therewould be flexibility in setting a weighted averagerate for domestic debit transactions.

On the wider IFR implementation issues that the PSRwill oversee, UK Cards has engaged constructivelywith the card and retailer communities at a Europeanlevel to develop practical solutions. These includehow to identify regulated and non-regulated cards;how retailers notify customers which cards they willaccept; and how to ensure card transactions are notunduly delayed by the requirement for customers tochoose the card brand they wish to pay with.

The resolution on IFR has also given us a useful opportunity to work closely with retailers on a number of issues over the year, particularly throughmeetings with the British Retail Consortium (BRC)and developing information for a wider retailer audience. This has included constructively addressingissues such as the best course of action if issuerauthorisation systems are unavailable. We have also worked with HMRC to ensure a level playingfield between existing and emerging paymentprocessors who are required to provide data for tax compliance purposes.

Encouraging competition and innovation through wider access

The UK Cards Association works in an environmentwhere increasingly the trend at both UK and EU levelsis to support open access to traditional bankingmethods. There is a particular drive for the UK tolead the world in ‘open source data’ in banking, encouraging new entrants into the financial servicesmarket to promote new solutions and product offerings tailored to the wants and needs of consumers in the digital age.

This is exemplified through the European PaymentServices Directive 2 (PSD2) which, through its proposed Access-to-Account provisions, allows customers (subject to their consent) to require their banks and card issuers to make their accountinformation accessible to third parties who can thenaggregate information across their customer’s accounts or initiate a payment on their behalf.

To drive more competition in the banking sector andto cement the UK’s position as a global centre forFinTech, HM Treasury has committed to deliver anopen application program interface (API)1 standardin UK banking. As part of its user reference group,UK Cards is contributing to the Treasury’s workinggroup to design a framework for standardising and modernising financial data access in the UK. A list of recommendations was published at the end of 2015.

Regulators are keen to promote innovation alongside competition. The FCA has taken a pioneering approach to removing the barriers of regulation for emerging FinTech companies throughinitiatives such as Project Innovate and the creationof its regulatory ‘sandbox’. At the same time, thePayment Systems Regulator (PSR) has establisheda Payments Strategy Forum to develop a strategyfor innovation in the UK payments industry. UKCards continues to participate in the Forum’s ‘consumer needs’ and ‘horizon-scanning’ working groups.

Both initiatives show how the role of policymakingmust evolve as regulators grapple with the seismicchanges the financial services industry is facing. As the organising principles of the industry alignwith the use of the internet and resulting digitaltransformation, organisations are being forced to change structurally, prompting a fundamental rethink as to how services are delivered and madesimpler for users.

UK Cards seeks to participate and identify whereand how the payment cards industry can contributeto these changes. However, it remains to be seenwhether the change in regulatory ethos and style ofapproach can realistically become a de-facto standardapplicable across the whole of the FCA, PSR andother regulators and Government Departments.

1 API the abbreviation of application program interface, is a set of routines, protocols, and tools for building software applications. The API specifies how software components should interact and APIs are used when programming graphical user interface (GUI) components.

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Ensuring consumer protection

Customer protection is an ongoing focus for The UK CardsAssociation – building on ourlong-standing commitment toresponsible lending and transparency. Over the courseof 2015, this has includedworking to help vulnerableconsumers struggling with debt;ensuring card company termsare clear and customers knowhow to complain or makeclaims; and helping Governmentand regulators prevent illegalactivity which could lead tocustomer detriment.

Tailoring products for specific consumers

UK Cards hosts a number of different forums inwhich members and stakeholders can debate issuesaround problem debt. Throughout 2015 credit anddebt experts from members have continued to meet regularly to consider how the industry’s well-established forbearance framework can continue to provide timely and appropriate help, includingthe provision of ‘breathing space’ for those who experience financial difficulties. Our Debt AdviceForum, which includes a wide range of debt charities, provided an opportunity to discuss charities’ views, such as the Money Advice TrustChanging Household Budgets report, which illustrated the significant surge in debt problems relating to council tax, water and fuel debts; and the StepChange Action Plan on Problem Debt,which focused on proposals for an ‘extendedbreathing space’ scheme.

Following the publication of the FCA’s ‘occasionalpaper’ on Consumer Vulnerability in February, UK Cards joined the Financial Services VulnerabilityTaskforce, alongside BBA, CML, Money AdviceTrust, Citizens Advice and a number of other keybodies including Macmillan Cancer Research, Age UK and the Alzheimer’s Society. This group

has been focussing on groups of people who can be particularly vulnerable to money problems. Wehave been fully engaged in establishing a baselineof existing cross-sector good practice and promotingit across a broader range of sectors, including utilities and local authorities.

All this work has fed into UK Cards’ consideration of a number of the potential remedies identified inthe FCA’s credit card market study (page 6). In additionto this important market review, UK Cards has also engaged with the FCA on a wide range of other issues, including the review of the consumercredit sourcebook (CONC), ongoing work around affordability and creditworthiness, and contingencyplans for consumers who may find themselves without a debt management plan should a debtmanagement firm’s authorisation application fail.

Elsewhere, UK Cards has also continued to play aleading role in credit industry engagement with theMinistry of Defence. Linked to the Government’sarmed forces covenant, ongoing work has sought to provide help and guidance for service personnelwho may be experiencing problems accessing keyservices such as bank accounts, credit facilities, insurance and mobile phones.

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Claims and complaints

A key role for UK Cards as a trade body is to ensurethat consumers using credit and debit card paymentsunderstand how they work and how to seek redressif something goes wrong. One of the benefits of payment cards over cash is that consumers havethe right to claim back their money if goods are notdelivered or do not match expectations. Throughout2015 we worked with the Law Commission as it hassought to make these rights clearer to consumers.We have played an integral part in their consultationprocess and look forward to working with them in2016 to make information for consumers morereadily available.

We also work with our issuer members to ensurethey deal with consumer complaints consistently.We have supported the aim of the FCA during 2015 to create a more flexible, customer-centric approach to complaints handling, responding totheir consultation and engaging in industry events.Since the FCA published its response we have been working with members on implementing therequirements, including extending the timescale for handling informal complaints and implementinglow cost phone numbers for consumer complaints.

Of equal importance, we work with our acquirermembers to monitor and raise the quality of interaction with their customers in the retail sector. This includes discussion with the FinancialOmbudsman Service on issues raised by small and medium sized firms that we can helpfully address with our members.

Protecting consumers from illegal online content

The card industry globally has robust systems inplace to ensure the retailers that they work with arecompliant with legal and regulatory requirements inthe countries they operate in and from. Over thelast year, our acquiring members have been workingclosely with the international payment networks to ensure that new UK gambling laws are adheredto by overseas gambling websites. We are also in ongoing discussions with the Department forMedia, Culture and Sport as it considers how best to prevent children from accessing free adultcontent online by requiring relevant online retailersto implement age verification processes.

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Facilitating payments innovation

Building on a long-standingand celebrated record of innovation, The UK Cards Association is keen to reinforcethe role of the UK as a globalleader in pioneering new usesfor card and card-like paymentsas the card moves from plasticto a plethora of other ‘form factors’. Part of our role as atrade body is to help more established technology likecontactless expand to new environments, while ensuringthe consumer journey remainsclear and consistent.

Adapting to changing retailer needs

In recent years the UK has seen several paymentservices gain significant market share by developingsolutions that are more sympathetic to the needsand designs of retail businesses. In February, UKCards co-hosted an event with the Founders Forum(Europe’s leading tech forum and comprised of asenior level network of leading digital and technologyentrepreneurs) on ‘The Future of Payments’ to helpthe card industry understand how retailers’ needsare changing. The event brought together 85 key influencers and senior level executives across theretail and payments industry, as well as FinTech entrepreneurs, leading venture capitalists and policy makers to articulate the vision for paymentsand commerce.

A central message from the event was that retailerswere not concerned about payment methods fortheir own sake but were more interested in howpayments may evolve to solve a number of key‘pinch-points’. It was hoped this could drive newsales and reduce basket abandonment, workingacross the full range of engagement channels.

Progressive organisations are designing and building services that exploit alternative technicalsolutions to meet this new demand. One growingtrend is the emergence of ‘Buy Buttons’ from payment providers and content providers such asFacebook, Pinterest and Instagram as part of theirproduct mix. Ensuring equivalent levels of EMV security, the ‘in app purchasing’ experience

encourages the perception of commerce as a ‘content’ and ‘content delivery’ proposition ratherthan merely as a physical shopping experience.

Through our engagement with regulators and otherswe continue to seek an environment which facilitiesinnovation that protects customer security and doesnot place an unnecessary burden on the industry.

However, UK Cards remains concerned that European initiatives such as the European Forumon the Security of Retail Payments (SecuRe Pay) arecreating complications which risk blunting innovationby imposing strict requirements for ‘strong authentication’. This requires checking two factorswhich run counter to the seamless transaction models being introduced by internet businesses. We will be responding to the European Banking Authority’s consultation to seek to ensure that different forms of authentication are considered tofacilitate the mutual goals of user security and innovation empowerment.

International payment networks are attempting to meet this ‘next generation’ requirement by developing new and more open protocols for EMVChip cards and are looking to adapt the 3D Securemodel to address the perceived problems with current processes. UK Cards continues to work withthe respective international card schemes to betterunderstand how deployment of these new servicesand tokenisation platforms will be incorporated andwhat impact this will have on the industry as a whole.

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Innovations in credit

One significant development over the past year hasbeen innovation around the credit side of the cardpayment industry. Traditionally, the credit modelhas relied on a data sharing ecosystem based onthe use of static file downloads, operated within a‘principles based’ environment between banks andthe traditional credit reference agencies. The newworld is increasingly facilitating access to real-timedata through the use of open APIs (page 7). Indoing so, it is opening a variety of conduits outsidethe range of the traditional players. UK Cards has initiated industry-level discussions to examine theimpact of such innovation on the traditional datasharing model and its governance arrangements.

The Government’s open API initiative will probablyaccelerate what is already happening in practice as consumers increasingly share their data withmultiple service providers who are themselves harnessing other sources of transactional and behavioural data from outlets including socialmedia and ecommerce/e-payment platforms to develop new credit risk models.

Embedding and expanding contactless payments

With the exponential rise in the use and acceptanceof contactless cards across the UK, UK Cards isworking tirelessly to ensure a clear and consistentconsumer experience underpins this growth. Thisyear we continued our contactless programme withinput from issuers, acquirers and the card schemeson a wide range of projects including a change tothe upper limit for contactless transactions, retailexpansion, and developing new opportunities withthe transit industry and charities. This work hasbeen recognised by both the FCA and PSR as a positive example of collaboration by the card industry and more information on the work we are doing to expand sectors where contactlesscards can be used is available on page 12.

Total contactless spending in the first nine monthsof 2014 was more than double that of all the previoussix years combined, and spending in the first half of 2015 was again more than the whole of 2014.This reflects both a growth in issuance and wideracceptance among retailers, as well as increasedawareness and confidence in the technology.

Partly based on the increased usage, UK Cards facilitated the agreement to raise the contactlesslimit to £30 from 1 September 2015, bringing theaverage supermarket shop within the limit.

To support the rise in the contactless limit, alongwith the introduction of Apple Pay, which allowed for the introduction of higher value payments (HVP)in the UK in July, UK Cards developed and publisheda retailer guide on contactless and HVP contactlesspayments. The guide has helped to promote contactless payments among smaller retailers and provides a useful point of reference for biggerretailers implementing higher value payments consistently across their stores.

In 2015 we engaged with Transport for London(TfL) as they looked at widening access to card payments in taxis in London. In November 2015TfL confirmed they will require all London taxis to accept card payments, including contactless payments, from October 2016. The UK Cards Association welcomed the move that will meanusers always have the option of using a debit orcredit card in taxis.

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New contactless opportunities – transit and charity

During 2015 The UK Cards Association led a pivotal projectto replicate the huge success of contactless payments on the Transport for London (TfL) network – which has seen almost 9m unique cards used on the tube, bus and train network since September 2014 –elsewhere in the UK. The transitproject continues into 2016, and UK Cards is drawing on the experience of collaboratingwith a new industry in its workwith the charity sector.

With TfL transactions representing around 11% of allcontactless transactions in the UK, expanding theuse of contactless payments on the transit networkoutside of London is an exciting opportunity for thecards industry. Consumer surveys demonstrate appetite for using contactless cards and devices to pay for travel in other UK cities, and could evenpave the way for a UK-wide open ticketing systembenefiting transport users across the country.

This year we have delivered an intensive programmeof workshops bringing together the card and transitindustries in order to develop a framework for contactless card use in different transit environments.The bus and train industries have embraced thework we have done to date and individual rail andbus operators are carrying out detailed analysis on the proposed contactless transit models with potential pilots starting to take shape for 2016/17.The work has also been endorsed at a politicallevel. Department for Transport ministers havepraised the project’s ability to progress work in

the notoriously complex world of transport and theNorthern Irish, Welsh and Scottish governments haveshown a keen interest in an open, non-proprietaryticketing system. Smart ticketing was cited as a key component in the Chancellor’s plans to grow aNorthern powerhouse, with smarter ticketing in theregions allowing easier travel for the national work-force. Based on the quality of the work we have delivered to date the transit industry is funding theUK Cards project team to continue work into 2016.

During 2015 we also initiated work with the charitysector on the potential for contactless payments tohelp address the downward trend in low value cashdonations. We worked with a range of charities tocollect their business requirements for contactlesscharity transactions – including collections on thestreet, in galleries and in shops – with the aim ofdeveloping appropriate solutions in 2016. We lookforward to further productive engagement with bothsectors through 2016 and beyond.

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Providing leadership in fraud prevention

Financial Fraud Action UK (FFA UK) is responsible forleading the collective fightagainst fraud in the UK payments industry.

Throughout 2015 The UK Cards Association hascontinued to work in partnership with FFA UK to develop and deliver fraud strategy on credit, debitand charge cards.

FFA UK incorporated in April 2015 with a Board of Directors comprised of senior representativesfrom the main retail banks, card issuers and cardpayment acquirers. With customers increasinglybeing targeted by criminal attacks, the Board declared its mission is to work effectively and collaboratively to protect consumers and businesses. As a result, it aims to create the most hostile environment for financial fraud in the world.

To do that, FFA UK supports collaborative strategies and tactical activities on behalf of the card payments and banking industries.

The changing picture of card fraud

In terms of overall losses, payment card grossfraud showed a slight increase of 1% to £249.9min the six months to June 2015 compared withthe same period in 2014. However, this periodalso saw a substantial growth in overall cardspending which means card fraud as a proportion of purchases fell to 6.9p for every£100 spent, the lowest level since 2011.

Losses on purchases made using a card remotely – those made online, over the phone orby mail order – remained flat at £174.4 millionbut the number of incidents of remote purchasefraud fell by 5 per cent. As part of that figure, e-commerce card fraud totalled an estimated£109.9 million, also relatively unchanged since2014. Meanwhile, online card spending increasedby 14.3 per cent to £67.4 billion in the first sixmonths of 2015, up from £59.0 billion in thesame period of 2014.

At the same time card fraud losses in the UK fellby 4 per cent to £167.5 million, while overseaslosses rose by 14 per cent to £82.4 million. A major contributing component here was the instances of criminals using UK cards in overseas countries that do not have the samelevel of security in place, such as the use of additional passwords for online purchases.

During 2015 FFA UK worked with its members to enhance its processes for collecting and reporting new types of data as well as existingdata sets. This enabled the industry to record, for the first time, the work it does in preventingfraud and FFA UK was able to report that bankssuccessfully prevented £355.4m of paymentcard fraud in the first half of 2015.

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Education and Awareness Campaigns

One of the pillars of FFA UK’s work continued to be the development and delivery of awareness campaigns helping customers to better recognisedeception scams and understand how to protectthemselves. FFA UK worked in partnership with arange of organisations during 2015 in order to dothat. In June, FFA UK partnered with NeighbourhoodWatch and Neighbourhood Watch Scotland to delivertheir annual national awareness week with a focuson phone scams. Some 173,000 NeighbourhoodWatch volunteers helped to warn their communityof the dangers of these particular scams and theweek was widely covered in the media.

Facilitating Law Enforcement

The Dedicated Card and Payment Crime Unit(DCPCU) is a dedicated police unit consisting of officers from the City of London and MetropolitanPolice Service, working alongside industry fraud investigators. It is fully sponsored by the paymentsindustry, which invests nearly £3.4m per year in itsoperation. The DCPCU’s national remit is to identifyand target the organised criminal gangs responsiblefor payment fraud, and since its inception in 2002has achieved £476m in fraud savings.

In 2015, DCPCU launched Project Skynet, a two-year EU-funded project focusing on the increasing threat cybercrime poses to the UK’s payment industry. This will boost the unit’s ability to deal with remote purchase fraud.

The DCPCU’s performance figures over 2015 continue to produce strong returns for industry. There were 150 people arrested in 2015 and 87 convictions were secured. Those convicted of crimesfollowing work conducted by the DCPCU received atotal of more than 114 years’ imprisonment.

Operation HamletA gang of Moldovan card skimmers who travelledto the UK to steal money from ATMs were jailedafter an international police operation.

The men were caught after DCPCU police officers received intelligence that three Moldovanmen would be travelling to the UK with cardskimming equipment to commit ATM fraud.

During the investigation, 8,096 compromisedbank card numbers were recovered from computers and memory cards. The gang hadharvested enough bank card data to exposebanks to a loss risk of more than £3.4 million.

At the time of sentencing Detective InspectorGlyn Whittick, of the DCPCU, said:

“This successful prosecution should send a message to any would-be criminal that they will be caught and brought to justice.

“It also highlights how close the links betweenBritish police and our counterparts in other countries are. Intelligence enabled us to swiftlytake out gang intent on defrauding banks and the public.

“The UK is not a destination for card skimmersand I would urge anyone thinking of carrying outthis kind of crime to think again.”

Intelligence Sharing

Throughout 2015 FFA UK remained the focal pointfor fraud intelligence and data-sharing across thepayments industry. Sharing intelligence enabledbanks and card issuers to track changing patternsin offending and supported the police in bringingcriminals to justice. The Fraud Intelligence SharingSystem (FISS) meant insights on the changing fraudlandscape could be shared with the National FraudIntelligence Bureau (NFIB) and the National CrimeAgency (NCA). During 2015, FFA UK played a leadindustry role in dealing with high profile data hacks(including Carphone Warehouse and TalkTalk), co-ordinating action through its intelligence unit the Financial Fraud Bureau to help prevent use ofthe compromised data to commit fraud.

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Communications and charitable giving

Charitable Giving

Since 2006, UK Cards has been the proud sponsor of the Internet Watch Foundation (IWF),which ensures the removal of online child sexualabuse images. The financial support provided byUK Cards means the IWF can acquire and deploythe best technology in assessing criminal content,as well as building upon its expertise in removingsuch material.

For many years, UK Cards has worked with charities to waive card payment fees for campaignswhich meet our qualifying criteria. During 2015,qualifying campaigns included Disasters EmergencyCommittee (DEC) appeal on the Nepal earthquake,as well as our ongoing support for Children inNeed, Sports Relief and Cancer Research.

1. The UK Cards Association press office also manages media activity for Financial Fraud Action UK and the Dedicated Card and Payment Crime Unit. These figures include media coverage and enquires across the three organisations, which collectively represent both the card payments industry and the financial fraud prevention community.

2. The value of the media coverage is based on the costof buying the equivalent amount of advertising spacein that media outlet.

UK Cards seeks to engage and inform our partners and consumers, including though the media. To that end, during 2015:

PRESS797MEDIAENQUIRIES

POSITIVE NEWSCOVERAGE

83 meetingswith Westminster ministers,MPs and Peers

230BROADCASTINTERVIEWS

ISSUED 46 PRESSRELEASES ANDMEDIA ALERTS

213,636 COLUMN CMS

SECURED

18 HOURS

FEATURED IN OVER

OF TV AND RADIO

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