Global Fraud Trends

Trying to win the war on fraud

Technology keeps improving at a rapid pace, connecting us to a growing number of tools, opportunities and people across the globe  

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Global Fraud Trends

Sep 18, 2017

Global Fraud Trends

Trying to win the war on fraud

Technology keeps improving at a rapid pace, connecting us to a growing number of tools, opportunities and people across the globe . The more we use technology to improve our lives, the more vulnerable we are to data hackers.  The more we take advantage of hi-tech security systems, digital scanning and social media, the more we compromise the security of our personal information. The more we expand our customer network online, the more we expose ourselves to costly global fraud. Scary, right?  It should be. 

According to the Federal Reserve, credit card and debit card fraud is one of the biggest concerns among U.S. consumers. What consumers generally do not know is that they are shielded from liability for unauthorized transactions made with their credit cards via the combination of federal law and industry policy. The result, as merchants have learned all too well, is that they (along with their banks and processors) assume responsibility for most of the money lost as a result of fraud. In 2015, that cost exceeded $21 billion.  And those numbers are only expected to increase.

How protected are we?

In general, the biggest threat to our security might just be the devices designed to make our lives easier.  Part of the new technology flooding the internet that captures our attention, such as new phones, cameras, digital music and home technology, actually provide fraudsters with continually updated information about where we are and what we are doing.  This unprecedented access to personal data maximizes the chances of successfully stealing it.  What’s more, every week as new devices and new categories of devices become available, gaps in security emerge.

And it’s not just cardholder data that is being accessed. In particular, hospital and medical information, along with student records, are growing targets given the wealth of information they can provide. It’s personal, for sure.  But it is also a real concern for businesses across the globe.  Major currencies are becoming increasingly digital. Retail purchases continue to move online. More and more transactions are happening without hard cash. This means cybercriminals will continue to gravitate toward the theft of digital dollars and goods. 

The more vulnerable we are, the more sophisticated fraudsters become. 

For many fraudsters, fraud is a full-time job and they are dedicated professionals, staying well informed about new technologies, new devices and new ways to attack. Solutions like used to be effective indicators of online fraud, but that was more than a decade ago.  Today many fraudsters know to intentionally provide slightly incorrect information just like normal buyers often do, making their AVS or CVV appear more legitimate.  And this is just one example of how sophisticated cybercriminals are beating the system.

 Additionally, law enforcement is largely rendered powerless. Online fraud is often committed by professionals living outside the U.S., and there is a lack of consensus on how to effectively prosecute such cybercriminals across country borders. Here at home, a shortage of resources and successful prosecutions indicate that law enforcement will not be any more successful this year. 

Next Steps

Financial institutions, credit card issuers and processors are teaming up to win the war against online fraud. Some issuers, for instance, are producing cards with dynamic CVV generators.  Rather than having the CVV number printed on the back of the card, these cards feature a small screen on which to view CVVs that are randomly generated and automatically renewed, as frequently as every hour.  And not just CVVs are changing.  Many believe that the plastic card itself will disappear in the not too distant future, replaced by mobile payments, biometrics, and even chip implants.

Mobile payments are already on the rise; in a 2015 survey by The Fed, 28 percent of smartphone users reported having used a mobile payment app during the year. The growing popularity of paying by phone, coupled with improving technology, means digital wallets may soon make physical credit cards obsolete.

With or without actual plastic cards, biometric technology has left the realm of science fiction; we now have the ability to recognize a consumer based on scans of his or her fingerprint, eyes, or face.  Biometric scanners are showing up everywhere from corporate headquarters to country clubs to airports.  Unfortunately, the technology for these scanners is still quite costly, and most merchants are not ready to make that kind of investment.  Nevertheless, it is not hard to envision the day when retail stores will be equipped with cameras that not only read your face, but also read the barcodes on every item you choose to purchase, right from your shopping cart or bag. Once you walk out the door, those items will automatically be charged to your account – no checkout necessary.

In addition to scanning, technology has already been developed that can read data from a chip that is actually implanted in a consumer’s hands or arms.  These chips — similar to the ones already used to “tag” and help find lost pets - contain personal payment information that allows you to complete a transaction simply by waving your wrist or hand over an RFID reader. The chips only activate in the presence of a reader; they won’t be trackable from wherever you go. 

What to Do

Your processor should continue to keep you apprised of new fraud prevention solutions like the ones described here.  These payment technologies will have drawbacks, and thieves will always find a way around the new systems put in place to thwart them. Consumer squeamishness and privacy concerns may also keep many of these technologies from catching on. Yet despite the uncertainty one thing is certain:  the days of easily-copied magnetic-strip cards are coming to a swift end, and that’s good news for consumers worried about fraud.

 Merchants just have to stay vigilant.

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