In 2016 there was $1.3 billion in debit card fraud as reported by the 2017 ABA Deposit Account Fraud Survey. That means debit card fraud accounted for 58% of all fraud types, across all channels, and in every kind of institution. The top three card fraud schemes that took center stage in 2018 have been credit and debit card chip replacement, credit and debit card skimmers and card cracking. Learn what these mean for your card portfolios and how AFS can help you fight card fraud schemes.
Credit and Debit Card Chip Replacement
Chip replacement is a new scam that has gained popularity in 2018. The premise is fairly simple but can be devastating for someone’s finances. First, mail containing a new debit or credit card is stolen. Then the criminals very precisely warm and remove the chip from an inactivated card and replace it with an old chip. Then your mail is returned to you in hopes of activating the card. When you go to activate your “new” card, you come to find out that this card is invalid. Consequently, the scammer has full access to your finances.
Credit and Debit Card Skimmers
Card skimmers are a bit more well-known but are also a highly popular scam in 2018. Skimmers are devices that fit perfectly over an ATM or transaction pin pad which is programmed to “skim” the information of all credit and debit cards that pass through it. As a result, the fraudsters are free to use your information to make unauthorized purchases without your immediate knowledge.
Credit and Debit Card Cracking
Card cracking is an interesting form of fraud because it requires active participation by the person getting scammed. It usually involves unknowing consumers falling into get rich quick schemes in which scammers promise them money for their cooperation. This is how the scam works. An innocent consumer gives the scammer account access, allowing them to deposit multiple checks – normally remotely – and make quick ATM or money order withdrawals. The goal is to get the cash in hand before the financial institution figures out the checks are fake. In exchange, the scammer then gives the consumer a portion of these funds as “payment” and encourages the consumer to report the card stolen. Not only is this a crime, but it now implicates the consumer. They did willingly gave away sensitive account information and are now on the hook for the losses.
How Can Banks and Credit Unions Fight Fraud?
- Invest Heavily in New Technology
- Utilize TrueCards®
- Educate Customers/Members on How to Spot Fraud
Technology designed to protect consumers against credit and debit card fraud should be a top priority for financial institutions. After all, stopping fraud does more than saving the FI money from avoided fraud losses. It maintains strong customer/member loyalty because they feel safe with the institution. And in today’s competitive landscape, loyalty is king.
There are plenty of new and exciting solutions to help stop fraud long before it impacts a consumer. One such advancement is the use of behavioral analytics software. These types of programs are designed to recognize common patterns in the spending habits of consumers and then confirm with the consumer that a purchase was made when they see a charge occur outside their level of comfort. Additionally, financial institutions are reinvesting in an upgraded authentication system. This usually requires consumers to receive a one-time code to a second mobile device which then grants them access to their account.
TrueCards® is a very different approach than behavior or credit monitoring. TrueCards® differs from other reactive approaches in that this solution allows institutions to determine the true point of compromise and block all cards at risk almost immediately, rather than relying on industry alerts to tell them which cards have already been compromised. Custom built for each institution, TrueCards® works across any processor or card network. This allows the institution to have a product specific to their needs, but also work across both their debit and credit card portfolios at one time for centralized management of at-risk cards.