THE Westpac-owned St George Bank is at the centre of one of the nation's biggest credit card security breaches after financial information was leaked from one of its clients.
The breach has already has forced banks to cancel and reissue more than 10,000 cards this week, while thousands of customers also face the sudden malfunction of their credit cards over the weekend.
The giant fraud will also affect thousands of automatic credit payments such as gym memberships and phone bills.
So far, the Commonwealth Bank has cancelled 8000 cards after detecting suspicious activity linked to an unnamed retailer. Bendigo Bank has also cancelled 2300 cards, while Westpac and St George cancelled and reissued ''a small number of cards'' - believed to be fewer than 1000 - as a result of the suspicious activity. ANZ has not reported any cancellations but was monitoring the situation.
Sources within the banking industry pointed to St George as the bank whose merchant client is believed to have suffered a security breach. It is understood police are investigating.
A St George spokesman said: ''We don't comment on the name of the merchant or their acquiring bank.''
The Commonwealth Bank discovered suspicious transactions on credit card holders' transactions and began cancelling the cards late on Thursday. It pinpointed the retailer that was common between the accounts.
As a precaution it cancelled the cards and reissued them, and notified the bank that provided services to the merchant. Given the size and rapid spread of the fraud, it is believed the security breach occurred online.
''The Commonwealth Bank continuously monitors all credit card transactions to protect our customers from fraud and during this process became aware of a potential credit card compromise,'' a spokesman said. He declined to give further details.
He said customers who received a message about potential fraud should not assume their account had been compromised.
The spokesman acknowledged that customers who received a new card would have to advise their billers of the new card account information to continue automatic payments and deductions from accounts.
A Telstra spokeswoman said the mass credit card cancellation could have a big impact.
''We have no way of knowing from our end which cards have been affected,'' she said. ''It's a difficult situation to manage.''
Last month, Sony shut down its PlayStation Network after hackers compromised the personal details of 100 million online users worldwide, including 1.5 million Australians.
In April, a data breach involving a firm contracted to Dell Australia exposed thousands of customers to potential scams by hackers who might have used the information to misrepresent themselves as representatives.
While the latest problem facing banks involves data security, they have been struggling with their own technical difficulties in recent months as they try to upgrade ageing computer systems.
While credit card fraud has been relatively low in Australia, it has increased in recent years.
Last year credit card fraud in Australia caused $155.4 million worth of losses, with more than 662,000 fraudulent transactions reported. This translates to 34.4 cases of fraud for every 100,000 transactions.
The chief executive of the Australian Payments Clearing Association, Chris Hamilton, said it was impossible to make the system fraud-proof while remaining convenient for millions.
''The thing for consumers to remember is they're not going to wear the cost of that. The fraud is going to go back to the financial institutions or the merchants,'' Mr Hamilton said.
A spokesman for the consumer group Choice, Christopher Zinn, said he expected the security breaches would dent people's faith in using credit cards, particularly online.
