At its simplest, credit card fraud can involve stealing someone’s physical credit or debit card and using it to make purchases. However, that type of credit card fraud is becoming rarer by the day. In fact, after the introduction of Europay, Mastercard, and Visa (EMV) chips, card present fraud at the point of sale significantly declined, while card-not-present (CNP) fraud drastically increased.
Now, twice as many consumers deal with CNP fraud than with card present fraud, and many of these fraud cases start online as a cyber crime. Keep reading to learn more about the intersection of credit card fraud and cyber crimes.
What Is Credit Card Fraud?
Credit card fraud refers to using a credit card to obtain money or goods fraudulently. Thieves may steal a credit card, copy the number off a credit card, or take over a victim’s account and have the credit card mailed to their (the criminal’s) address. They may also open a new credit card in the victim’s name or try a variety of other techniques to steal money or buy assets.
What Are Cyber Crimes?
A cyber crime is any crime that starts online. One type of crime is a scam artist befriending someone on a social platform and convincing them to send money over the platform using their credit card. Or, thieves may steal a physical credit card or obtain its numbers and use that information to make purchases online.
Alternatively, a thief may hack into a bank or business database to steal personal details about customers and sell those details online. Then, the thief who buys that information can use it to fraudulently open an account with the victim’s details.
How Do Credit Card Fraud and Cyber Crimes Overlap?
There are countless types of cyber crimes, and many of them involve credit cards. The internet has changed how thieves target data and information. While some thieves focus on hacking large files of information that they can sell online, others simply target a single victim or steal a single card. To prevent credit card fraud, you need a fraud detection and prevention plan that focuses on the threats of cyber crimes.
Consumers understand this risk instinctually, and their response to fears about crimes highlights this fact. In one survey, respondents said they feared identity theft more than having their home broken into — 47% said identity theft was their biggest fear, while 27% chose a home break-in.
These fears are based in reality. The Federal Trade Commission (FTC) reports that credit card fraud is the most common form of identity theft. Annually, there are over 133,000 cases of identity theft involving credit cards, and credit cards are used in almost all (92%) of fraudulent transactions.
Credit Card Fraud Online
Once a scam artist has someone’s credit card details, they can make purchases online. This is one of the most popular ways to use stolen credit card information. Between 2016 and 2017, online shopping fraud increased by nearly a third, and transactions from foreign internet protocol (IP) addresses were about seven times more likely to involve fraud than transactions from U.S. IP addresses.
Cyber Security and Credit Card Fraud
The cyber world doesn’t just increase the risk of fraud for credit and debit cardholders. It can also play an instrumental role in protecting people, businesses, and financial institutions from the risks of credit card fraud. If you run a financial institution, you need cyber security tools in place to help reduce credit card fraud.
Generally, the three basic steps in dealing with credit card fraud include the following:
- Stop the Losses
- Recover the Money
- Manage the Aftermath
When fraud occurs, these steps are essential, but for true protection, you need to adopt a slightly modified, more proactive framework, such as the following:
- Avoid the Losses
- Protect the Money
- Create a Disaster Response Plan
With a proactive approach, you use fraud protection software to avoid losses and protect the money. The right programs identity patterns and flag potentially fraudulent transactions before they become a problem. But, even when you’re taking every step possible to prevent fraud, you still need to create a disaster response plan just in case.
Reputation management is critical for financial institutions, and after a breach or a significant case of fraud, you need to manage the disaster very carefully. Your disaster response plan needs to include steps to stop the loss and protect the money, but it should also detail how you’re going to reach out to customers and maintain a trustworthy reputation moving forward.
Protect Your Financial Institution from Cyber Threats
To reduce credit card fraud, you need to educate your customers about the biggest threats and how to avoid them, but you also need to take steps internally. Ideally, you should do the following:
- Insist on smart password practices — require employees to change passwords on a regular basis and use passwords that cannot be easily guessed.
- Update antivirus software — to avoid external threats from hackers, your financial institution’s computers need updated antivirus software.
- Set up bank apps and websites to use dual-factor authentication — to prevent hackers from getting into your website or your customer’s accounts, require customers to sign in using dual factor authentication.
- Be careful with email — A lot of scam artists may try to breach your computers through emails sent to managers or executives in your bank. Make sure your team knows how to avoid suspicious links, downloads, or requests.
- Work with a fraud specialist — To ensure your financial institution and your customers are thoroughly protected from cyber threats and credit card fraud, work with a fraud specialist to set up fraud protection and detection tools.
- Report scams — Report any scams or attempted scams that affect your financial institution. Then, other bankers and anti-fraud professionals can learn from your experiences.
At SQN Banking Solutions, we understand the intersection between cybercrimes and fraud, and we can help protect your financial institution from these threats. To learn more, contact us today.