UK card fraud losses rose by 20 per cent last year, totalling £504.8 million, according to figures released today.

The rise is attributed to fraudsters increasing their activity before the security benefits of chip and PIN are fully realised, the Association for Payment Clearing Services said.

Card-not-present fraud (CNP) continues to be the biggest fraud type - up by 24 per cent to £150.8 million compared to £122.1 million in 2003 - however these losses only grew in proportion to the number of businesses now offering transactions made by phone, fax or online.

Online credit card payments have increased five-fold since 1999, to the point that ten per cent of all credit card spending now takes place online.

ID theft on cards has grown significantly over the last two years - up 22 per cent from £30.2 million in 2003 to £36.9 million in 2004 - but remains a small proportion of overall fraud losses.

Counterfeit card fraud increased slightly - up 17 per cent to £129.7 million in 2004 from £110.6 million in 2003 - and there was a small rise in fraud on lost and stolen cards, up two per cent to £114.4 million compared with £112.4 million in 2003.

Together fraud on lost and stolen cards and counterfeit cards accounted for almost half (48 per cent) of all losses.

With chip and PIN now almost fully implemented, however, it is set to have a major impact in these two areas.

Fraud on cards stolen before the genuine cardholders receive them (mail non-receipt) grew sharply - up by 62 per cent to £72.9 million - as criminals took advantage of the unusually high number of cards sent out due to the roll-out of new chip and PIN cards.

In 2004 there was an average of some 100,000 cards a day sent out. Fraud at UK cash machines also grew by 81 per cent to £74.6 million, up from £41.1 million in

2003. Increasingly, chip and PIN will help to address these areas of fraud as the number of shops where cards stolen in transit can be used without a PIN will diminish and it will also prevent the use of skimmed cards at cash machines.

The downward trend in fraud losses overseas continued - down 11 per cent to £92.5 million - thanks to card companies' use of increasingly sophisticated fraud intelligence systems.

Sandra Quinn, director of corporate communications at APACS, said: "When the banking industry decided to introduce chip and PIN in the UK our fraud forecasts showed that without it card fraud losses would top £800 million by 2005. "So while we still have a battle on our hands, we are on track to see a significant reduction in this amount."

As well as plastic card fraud, gangs also moved into other types of financial crime. In 2004 total losses for online banking fraud were recorded for the first time and reached £12 million.

These scams mainly involve phishing, where customers are duped into disclosing personal security information, as well as Trojans that capture security credentials through keystroke logging.