The use of chip cards is making e-commerce vulnerable to fraud  

Online business is flourishing. So is fraud as hackers are increasingly being well-funded and equipped with high-end technology. The increasing use of chip cards has, however, rendered their task difficult. In the same breath, this trend has forced them to review their approaches and shift to e-commerce businesses.

Credit card fraud protection has been enhanced

The wide adoption of EMV chip cards has proven to be fruitful. Credit card fraud has been a real challenge for many years, but it seems that this issue is finally being rectified thanks to the advent of the chip card. A fresh study conducted by Visa has revealed that the last two years witnessed a drop in such fraud by 70%. It is expected that merchants who have not adopted EMV chip card will be inclined to do so after the publication of this study. At the same time, customers are increasingly wary of using their credit or debit cards in stores where only magnetic stripe cards are accepted. 

Fraudsters are now targeting e-commerce or CNPs

With the introduction of EMV chips enabled debit and credit cards, fraud has escalated from in-store fraud to e-commerce fraud. Michael Graff, risk analytics manager at Radial, explains that since it is difficult to duplicate chip technology, the criminals have moved on to take advantage of e-commerce or CNP (Card Not Present).

The fraudsters have taken advantage of several weaknesses like that of Equifax; a large amount of personal data of about half of America was subsequently leaked on the dark web. Fraudsters can easily purchase card information on the dark web now.

Research conducted by Radial indicated a major increase in fraud since last year of which the reason was unclear till the breach in Equifax was made public. Graff stated that Radial witnessed 300% to 600% spike in online fraud which was linked to the breach in Equifax.

The data breach at Equifax created a havoc

The data breach of Equifax happened in mid-May to mid-July. However, there have been indications that the system of the company was penetrated earlier than that. Records like driver license numbers, addresses, date of births and social security numbers were stolen by the hackers on around 143 million consumers in America.  This breach in the company was not announced till late in September, and this could have given fraudsters the freedom to take advantage of the breach longer.

Resetting your account doesn’t protect you

The majority of individuals use same passwords for multiples websites which means hackers can easily utilize the credentials even after the hacked account has been reset. Graff explains it further by stating that if an account with one company has been hacked but this fact hasn’t been disclosed then the individual would keep on using the same password for their account in the other companies. Even when the targeted company rest the account, the hackers will use the same credentials on other accounts successfully.

How Radial Is Preventing this Issue

Once data has been breached, fraudsters are quick in using that information. The increase in calls at the customer service centre or an increase in account activity should be a warning single to the merchant.

Radial ensures that all the sales it approves are genuine. In case, the card it approved is a fraud, the company pays the merchant. The legitimate consumers are identified by Radial by working through ten years of both international and domestic data.

Graff believes that numerous merchants are hesitant towards international transactions. If the billing address, shipping address, IP address and credit card are all from different states or countries that Radial alert a fraud investigator to personally look into it.

Businesses and merchants shouldn’t be wary of international transactions

In today’s age, there are a number of customers who frequently travel and might have homes in different countries. It is essential for merchants and businesses to identify these customers and get their purchases approved quickly. Else, they might lose a valued customer.

International sales are worrisome for many businesses since they believe they can check the authenticity of the customer. According to Graff, the businesses and merchants who do this are merely losing their own customers. It is integral for them to start implementing fraud prevention strategies.

The main indicators include the approval ratings, the number of transactions being declined on suspicion of fraud, liability of fraud that is slipped through the system, and the percentage of orders being held for fraud review.

97.5% should be the benchmark for approval rate as per Cybersource/Visa for the e-commerce industry. According to Graff, more than 99.5% can be the approval rate of Radial. Clients of Radial are likely to generate 2% more sales as compared to others.

 Article published in EMV and Smart Payment Cards :


Image: Shutterstock