Online banking fraud losses have fallen a staggering 67%, shrinking from £22.4 million in the first six months of 2006 to a paltry £7.5 million in the same period this year, according to figures released by UK payments and banking association APACs.

The dramatic decline is due in large part to the range of measures taken by the banks to detect and prevent fraud, says APACs. In particular, the rise of two-factor authentication, which has been rolled-out by the likes of Barclays and the Royal Bank of Scotland, has played a major role in reducing the success of phishing attacks.

Many banks and building societies also make efforts to shut down phishing sites operating in their name.

But while the banks and vendors will claim the news is a vindication of two-factor authentication, it remains unclear exactly to what extent technological measures are really to thank for the downturn. It is likely that consumer awareness – long regarded as the major obstacle to safer online transacting – has also significantly improved during the past year.

In addition, the first six months of 2006 experienced unusually high levels of fraud, according to APACs, meaning the differential might not be as significant as the banks and their technology partners would like to believe.

Despite some improvements in the online banking realm, however, online shopping, phone and mail order, continue to be fertile areas for fraudulent activity, with losses growing a chunky 44% to hit £137 million.

Plastic card fraud was also up 26% in first six months of 2007.

Further reading

State of security

Plastic pain