From online shopping to entertainment subscriptions, contactless payments have risen in popularity over the past several years. When the Covid-19 pandemic struck in 2020, it pushed businesses — big and small — to adopt contactless payments to cater to customer needs, and today, the shift only continues to grow. According to Grand View Research Inc. data, the contactless payments market will reach $164.15 billion by 2030. This market growth is associated with the increased adoption of payment tech, such as host-based card emulation and near-field communication (NFC). However, as with most digital processes, contactless payments are also vulnerable to digital threats impacting businesses and customers. One such prominent form of digital threat is credit card fraud.
What is credit card fraud?
Credit card fraud happens when a purchase or cash advance is made using your credit card information without your prior knowledge. In 2021, the Federal Trade Commission recorded 389,737 cases of credit card fraud reported by US consumers. This totaled a loss of $181 million. Unfortunately, credit card fraud happens more than one might think, often at the cost of consumers and businesses selling their products or services.
Credit card fraud can happen through various methods. Losing your physical card or getting it stolen will enable a thief to easily make transactions online, over the phone, and in stores. Identity thieves can also use your credit card information — without the physical card — to make online or over-the-phone purchases. Lastly, using tools such as a skimmer, a thief can steal credit card data from a card reader to use the information and make a counterfeit or clone credit card for in-store use.
Credit card fraud in electronic payments
Most consumers think online purchases take place strictly between the customer and the business they transact with. Unfortunately, intermediaries are often involved for security and regulations’ sake. As mentioned in The Online Fraudcast Podcast, you have three key players: the Consumer, the Financial Institution, and the Merchant. Each of these players is siloed off from the next, which is how many fraudsters can take advantage of these siloes and their lack of cross-communication.
Businesses that use payment processors such as CardConnect can accept more types of payments while relying on the safety and protection of customers’ financial information. However, a business cannot know who is putting the credit card data into a payment form at a given time. This is especially dangerous when fraudsters use a third party to pick up the product, unbeknownst to the customer or business. In such cases, open, transparent communication between companies and customers is crucial to ensure that the credit card information used wasn’t stolen or otherwise illegally obtained. Communication during payment and after-sales confirmation can go a long way in detecting credit card fraud through electronic payments.
Fighting credit card fraud
Today, card companies rely on technological advancements to improve their fraud-fighting efforts. According to Nilson Report, global companies such as Visa and Mastercard rely on machine learning and artificial intelligence to spot new trends used by professional fraudsters. As a result, this limits the fraudsters’ ability to maximize their takings from a business and its customers. Today, trends point to a shift from the card business, indicating that thieves and fraudsters are gaining interest in newer arenas like cryptocurrency. Additionally, most modern card networks have become adept at spotting potential credit card fraud and contacting banks to shut down schemes. This provides a lot of hope for customers and businesses alike as we’re moving towards more security, which can lead to better financial results overall.
Written by Camila Ethan for charge-it-now.comCategories:: Credit Card Processing