Credit card fraud is an expansive (and sometimes confusing) topic that affects countless consumers and the payments ecosystem as a whole.
Payment processors are on the front lines helping businesses identify card fraud and employ tools to help prevent it. While credit card fraud takes many forms, here we define three common types and techniques that businesses can use to help prevent it.
Card-Not-Present (CNP) Fraud
What It Is: CNP fraud occurs when a fraudster uses stolen account information to buy goods and services without physically presenting a payment card. The widespread adoption of EMV (chip) cards dramatically reduced in-person credit card fraud at the point of sale but shifted fraud to CNP channels like ecommerce. Add to that the seismic shift to CNP commerce during the pandemic, and CNP fraud is expected to increase 16.4% in 2021 according to recent data published by Aite Group.
How To Prevent It: Businesses can use tools like Address Verification Service (AVS), Card Security Codes (CSC), velocity checks, and EMV 3DS to help prevent CNP fraud. Payment partners can help businesses ensure that they have the proper tools to help identify and prevent CNP fraud.
Card Skimming/Card Shimming
What It Is: Card skimmers are small pieces of hardware installed on top of magnetic stripe card readers that illegally collect and store card data. Skimmers enable thieves to amass troves of data that can be downloaded and used to make fraudulent transactions. Unattended magnetic stripe card readers, like those installed at kiosks, gas pumps, and ATMs, can be popular spots for card skimmers.
The shift from magnetic stripe readers to EMV readers also forced thieves to invent new ways to steal card data. Card shimming is the next evolution of skimming, which involves installing a small device into a chip card reader that collects account information from the chip instead of the magnetic stripe. While this information cannot be used to manufacture new chip cards, it can be used to initiate fraudulent CNP transactions.
How To Prevent It: Be aware of card readers that look unusual, especially if payment cards don’t enter and exit easily. Consumers should also monitor account transactions and enable fraud alerts so they are aware when unusual transactions occur. Digital wallets and contactless card readers also allow consumers to avoid possible exposure associated with inserting cards into readers.
What It Is: Carding is a type of credit card fraud where account information is stolen and used to buy prepaid cards, typically gift cards. Using the example of gift cards, these cards can be purchased and then sold OR used to purchase merchandise that is resold for cash.
How To Prevent It: Carding can be identified and avoided using many of the techniques covered above including AVS, CVV, velocity checks, and EMV 3DS.
Get in touch with Paystri to learn more about credit card fraud and how to prevent it.