What Do I Do With My Old POS Terminal?
June 9, 2020
Why Work With A Payment Processor?
June 23, 2020
A few years ago EMV cards were introduced here in the US and they were intended to help reduce fraud. Fraud is one of the biggest problems in today’s economy and it is something that everyone pays for, except for the thieves until they get caught. There are several different types of fraud, so as a merchant knowing what to look for can help to lower some of the risks that you face. And it can save you some time, money and a lot of hassle.
Fraud is not necessarily an easy thing to do and it requires a lot of ingenuity and guile on the part of the thief. Many of the people who perpetrate these acts are very intelligent and one does have to wonder what they could do with their lives if they did not turn to crime. Below are some of the more common tactics that they use
Sleeper Fraud
A thief can acquire a credit card number a number of different ways, but mostly by stealing it themselves or buying it on the dark web. In many cases the victim does not know and will not know until they review their statement and this gives the thief time to act. In this case the thief will open an account and make a number of small purchases using the card.
By making small purchases these tend to go under the radar, establish trust between the thief and the merchant and are harder to spot. When the time is right they will make a large purchase or several large purchases. With an established history with the merchant a bank may not be as quick to flag the purchases meaning this could go on as long as the card is not declined.
Chargeback Fraud
A chargeback typically happens if a customer receives a damaged or faulty item or if they did not order something. It voids the purchase by withdrawing the funds deposited with the merchant and applying a credit to the consumer’s card. If the merchant disputes it, it is also possible upon review for the bank to forcibly remove the funds if it is found to be valid.
This is a common tactic for thieves as they will make a purchase (see above) and then claim that it did not arrive or was damaged and request a chargeback. Not only then does the thief get the item but they get their money back and this kind of fraud costs merchants millions of dollars every single year.
Fallback Fraud
When a thief steals a credit card number many of them will make their own card to use. One of the nice things with EMV cards is that they are difficult to circumvent but they have one major flaw and that is the magnetic stripe. The magnetic stripe has been on the card for decades and despite the new EMV chips it has not disappeared. The magnetic stripe is also very easy for a thief to encode.
In this instance for a thief the EMV chip is actually just for show and will not work. Chip malfunctions are common and after three failures they will be able to fall back on old methods and swipe the card and sign their name to authorize a transaction.
Synthetic ID Fraud
Thieves in the past have used a real person’s information to open accounts and this itself is not new. It has evolved over time as thieves have begun using stolen information from minors to open accounts and combining it with some fake information to avoid being caught. These people do exist and they have real information to use like a social security number and on top of that many people do not monitor the credit reports of these people. It is possible for this kind of fraud to go on for decades before it is caught and by that time the child has little recourse with their credit damaged in some cases beyond repair.
Deep Fake Fraud
This is the next generation of fraud. It uses artificial intelligence to create videos of people saying or doing things that they did not actually do. It would be possible to create audio of someone to maliciously gain access through customer service, and in fact this has already happened. It would be impossible for a merchant or phone agent to know that they are not dealing with a real person on the other end of the phone.
In this case it would be possible to match a person’s voice using AI and gather some information about a person from publicly available information like social media. With that in hand it would be possible for them to call customer service and get access to an account, which will necessitate a change in customer service protocols making things much more difficult for everyone.
Fraud is something that affects every merchant and consumer in the US and as a merchant you are on the front lines when it comes to dealing with it. It is a never ending fight and when one avenue is closed another seems to open up even more danger. Technology is improving and while it may make our lives easier it gives thieves more tools in their tool belts.
Knowing what to look for can help to mitigate fraud. Dealing with it may require some grief and some effort on your part if you are concerned about a transaction. It may require more effort than you would prefer to give or have time to give and there is risk because if what you suspect as fraud is indeed legitimate you have burned a bridge with that customer. Is it worth it? Stamping out fraud is always worth it and no one said it would be easy.
