During the COVID-19 pandemic, credit and debit card fraud has skyrocketed. The Fidelity National Information Services, reports a 35% increase in fraudulent transaction volumes. This shows the year-over-year jump as of April 2020.
Everyone is working to decrease contact during the pandemic. Contactless credit and debit cards help accomplish this objective.
Yet, there are dangers of contactless cards and "card not present" (CNP) use. Continue reading to learn more and how to protect your business.
Companies offer debit, credit, and smartcards for contactless purchases. These cards have a radio RFID chip (frequency identification) embedded. This provides wireless communication using electromagnetic or electrostatic coupling to identify the card.
When the card is near the point-of-sale terminal, the RFID sends a one-time code. This doesn’t give any account details. It uses a new code each time you buy something.
CNP transactions represent another type of contactless purchase. This means the business doesn’t physically see the credit or debit card. Thus, the business can't compare the card to a second form of identification such as a driver’s license.
During the pandemic, purchases via the internet, known as eCommerce, has grown. As of May 2020, online spending hit $82.5 billion. This represents a 77% increases year-over-year.
For businesses, the greatest risk lies in CNP payments. You have less hard evidence that the payment is valid. This increases your fraud exposure.
False positives in CNP credit card processing can occur. This means that a fraud suspicion gets triggered and erroneously declines the transaction. Card companies use automated fraud detection systems based on users' activities and patterns.
This can cause account lockdown and increase customer dissatisfaction.
Account takeover describes a type of fraud or identity theft. Thieves access people’s account credentials to make purchases. For the seller, this can result in chargebacks and loss of revenue.
Payment processing fraud prevention is the ultimate goal. Yet this can increase your expenditures to fight fraud. Your measures may also alienate legitimate customers.
Applying “Know Your Customer" (KYC) practices when opening accounts help combat fraud. KYC procedures create significant checkpoints to ensure that it's a real-world identity. This screens and detects synthetic identities.
Europay, MasterCard, and Visa (EMV) security decreases the risk of fraud and counterfeit card use. This works best with card-present transactions. Its success is more limited with CNP sales.
Merchant payment systems without encryption leave payment data more accessible to thieves.
Some credit card processing payment protections now use machine learning methods. This increases credit card fraud detection in online transactions. The system analyses previous customer buying details and creates a behavioral pattern profile.
A sliding window strategy sorts cardholders into groups based on their behavior patterns. This allows for quick detection of aberrant transaction patterns. Ongoing customer behavior observation adds more data to increase accuracy.
As eCommerce and contactless transactions increase, companies must stay on the cutting edge. It’s important to understand the dangers of contactless cards. Vesta provides solutions to help protect you from fraud and loss of income.
Our fraud analysis data warehouse checks each transaction before completing the purchase. The Vesta system uses a machine learning pipeline with a fraud analysis review. This provides real-time decisions and security measures at the point of sale.
We focus on helping you take care of business with zero fraud liability. Vesta customers see a 99% or higher reduction in chargeback fees. Contact us today to ask questions and learn more about our products.