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In its earliest form, credit and debit card fraud occurred primarily through stolen cards. Financial institutions were able to combat crime through card-activation security measures and first-generation neural networks. As new payment technologies proliferated, fraud became more sophisticated and has increased through large-scale operations that include phishing, card skimming, counterfeiting, card-not-present deception, identity theft, data breaches, and more.
The introduction of EMV or chip cards will provide new safeguards during transactions at the point of sale, because chip cards are virtually impossible to counterfeit. However, fraud will persist and criminals will follow the path of least resistance. As seen in Europe, when the chip card was introduced, fraud increased for card-not-present transactions, such as e-commerce and in-app purchases. For a credit union to protect itself now, additional approaches to risk management that complement EMV must be addressed. There is still much work to do.
The cost of payments fraud, which was nearly $7 billion in the United States in 2014, is soaring, and breaches are occurring with unsettling regularity. In fact, breaches involving financial data increased more than 83% from 2013 to 2014.
The true cost of this fraud, however, may underrepresent the total loss to credit unions. Categories of actual expense that are either underreported or not reported at all include:
Case management fees
Call center staffing
Cancellation and reissue
Fewer post-fraud transactions
To remain protected, credit unions must adopt a sensible approach that leverages EMV and current best practices. Additionally, they need to consider providing capabilities that empower and enable members to actively monitor their accounts. Re-evaluating risk programs and ensuring that cardholders are empowered and engaged can make a true difference in the battle against fraud.
Credit unions should begin with a best-practice risk mitigation strategy that includes the following essential ingredients:
Real-time transaction scoring on all transactions
Real-time case management
Dynamic transaction blocking of suspected sources
Monitoring and tracking of alerts on compromised cards
Creating and implementing rules that are credit union specific
Analysis and support from a dedicated risk analyst
Credit unions should consider customizable rules and options, and risk advisory services to complement their best-practice toolset. One size definitely does not fit all in fraud rules and strategies, and industry analyst experts can help. It is beneficial to have an analyst partner who can advise on remediation strategies, design fraud rules tuned to the unique characteristics of a credit union’s card base, generate specialized reports, proactively gather additional information, and provide supplemental analytic services and assistance to reduce exposure.
Industry statistics show that cardholders who review their account activity on a routine basis are more likely to detect and report fraudulent activity, thereby reducing losses. Cardholders who understand how to safely monitor their payment cards are reasserting themselves as one of the strongest lines of protection against card fraud.
Credit unions can provide new mobile technology that will empower members with information and control of their cards through a single mobile app.
With this new technology, cardholders can define when, where, and how their payment cards are used, and they can view every transaction that is made or attempted.
Mobile card controls provide peace of mind by allowing members to:
Turn multiple cards on or off
Set geo-location controls
Monitor and control transactions
Manage and review card usage for their dependents
Enforce spending policy compliance on business cards
When cardholders are actively engaged, they become part of the fraud-fighting team.
Credit and debit cards are the payment method of choice in the U.S, but fraudulent use of these cards will not stop entirely with the introduction of EMV. Every credit union must build comprehensive and holistic fraud-detection strategies that combine new risk rules with personal, hands-on investigative support services alongside significant empowerment and engagement tools for consumers. Only a comprehensive, dynamic strategy will ultimately reduce losses and ensure member peace of mind.
For more information, visit www.fiserv.com.
This sponsored content article is provided to the credit union community for shared insights and knowledge from a recognized solutions provider in the industry. Please note that the views and opinions offered here do not reflect those of Callahan & Associates, and Callahan does not endorse vendors or the solutions they offer.
If you are interested in contributing an article on CreditUnions.com, please contact our Callahan Media team at firstname.lastname@example.org or 1-800-446-7453.
September 14, 2015
9/15/2015 10:46 AM
You mention fraud increasing for card not present after EMV yet nothing is stated for having STRONG Authentication, which we already know that 76% of the cause of Network Intrusion is stolen credentials!
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