Credit card fraud is a critical risk factor for financial institutions, payment processors, and banking entities, as it negatively impacts reputation, operations, and finances significantly. Globally, the rate of credit card fraud is rising steadily year over year, with key areas such as identity fraud, chargebacks, and duplication, being critical secondary risk parameters. 

With global losses resulting from payment fraud tripling from 2011 to roughly $32.39 billion in 2020, it is important for the credit card value chain to focus on strengthening governance and control measures. The rise of credit card use globally has also increased the risk of fraud, which is why payment companies and merchants need to adopt the latest fraud analytics and prevention solutions, such as MerchantRMS. 

Companies need to focus on the “how”, both human and technical reasons, and the “how many” aspects of credit card fraud to formulate a data-driven approach. Firms also need to identify key macro-industry trends, to predict fraud better and ensure effective protection. With almost 47% of businesses experiencing some form of fraud in the last two years, they need to analyse larger trends in fraud to truly tackle it holistically. 

Reviewing major credit card fraud methods

We can understand the “how” of how people lose to credit card frauds, by analysing customer behaviour, key cybersecurity measures implemented, and the impact of fraud analytics solutions

1. Customers often use their credit cards across a range of digital and physical transactions, allowing for several intrusion sites to emerge across a larger remote network. These can lead to significant fraud risk, especially within chargebacks, accidental fraud, credential stuffing, account takeovers, etc. 

2. The growth of global e-commerce, an industry that is set to expand by $1 trillion by 2025, is a critical risk area that merchants & payment companies need to focus on. Payment fraud losses are set to reach $37.34 billion by 2025 as well, creating a stronger need for digital payment fraud protection. As customers transact more on online mediums, the risk of payment fraud rises exponentially as well. Key online fraud protection solutions, such as MerchantRMS, can help protect enterprises from this rising trend. 

3. Phishing is another critical reason why credit card fraud cases are rising worldwide, as it directly focuses on scalable identity theft. Customers may falsely believe emails to emerge from their credit card providers, merchants, or e-commerce stores, allowing hackers a clearer pathway to execute fraud. To counter secondary layers of protection, hackers may also impersonate calls from banks to ask for OTPs or temporary authentication proof. 

4. Keystroke logging is another important intrusion vector that customers should be aware of. Malware installed in a customer’s device or laptop can track keystrokes entered on merchant websites. While customers need to perform regular malware sweeps, merchants and payment companies need to update security measures to counter these attack strategies. 

5. Finally, theft and loss of credit card is a major reason why credit card fraud occurs. The delay between loss events and reporting can provide adequate time for hackers to perform transactions on a customer’s lost card. Loss prevention methodologies can help mitigate the risks associated with theft, but faster reporting, instant notifications, and active behavioural tracking can help reduce the financial loss significantly. 

Understanding associated fraud risks 

There are several associated risks related to the various types of fraud within the credit card ecosystem. From risks related to payment companies to loss of merchant reputation and revenue, these losses can have an overwhelming detrimental impact. 

• A key risk factor within credit card fraud is identity theft, which is why it is important to have the right controls in place for complete protection. Hackers can gain access to bank accounts through privilege escalation and create losses due to financial theft. 
• Disputes and chargebacks are also critical risk factors for merchants and payment firms, as they need to invest additional resources to counter fraud activities. Companies need to have a robust infrastructure of fraud data accessing and dispute resolution logging, to successfully derive the right intel. Tools, such as MerchantRMS, can help streamline dispute and chargeback management, improving recovery and protection against more sophisticated hacking attempts. 
• Another critical aspect to understand from a payment processing and fraud standpoint is the globalisation of e-commerce. With 15-20% of e-commerce transactions occurring internationally, companies need robust fraud prevention within the cross-border payments domain. International payments add a secondary layer of risk for fraud prevention, as there are several processors, gateways, forex partners, and exchangers, involved in transactions. This enhances the risk portfolio for merchants that may have international customers. 

The critical role of technology in global protection

Technology plays a vital role in strengthening protection measures, especially in key areas such as fraud detection, multi-factor authentication, transaction verification, real-time monitoring, etc. The digitisation of credit card management, across the industry ecosystem, can drastically reduce the emergence of fraud and large-scale chargebacks. Through the introduction of fraud detection solutions, such as Merchant RMS, enterprises can reduce fraud, improve payment acceptance rates, and boost customer trust.  

Active monitoring & detection is a critical role that technology plays in the prevention of credit card fraud. Companies with a dedicated fraud prevention program lowered their remediation and response cost by 42%, through the integration of key technologies and policies. 

These anti-fraud technologies, allow for active mapping of credit card transactions to flag anomalies in user or device activity. Whether it be larger transactions, greater volumes, unauthorised locations, or blacklisted websites, there are several rules and parameters that can be set when using a robust payment fraud prevention tool. 

Establishing the right compliance measures is also vital to strengthening protection measures. Having the right credit card fraud detection tool onboarded can enable active network scanning, card processing analysis, and anomaly detection. 

This can help companies remain compliant with anti-fraud guidelines, and handle payment authorisation in a more data-driven way. The introduction of AI can also help expedite the analysis of millions of data points, for more real-time detection of active fraud cases. 

Another essential use of key technical solutions is deep forensic investigation. Close to 56% of companies conducted an active investigation into their worst fraud incidents, leaving significant room for enhancement of forensics methodologies. 

A fraud behavioural tracking tool can provide critical insights to remediation teams for the formulation of the right strategy. The right insights can help teams process fraud requests faster while executing data-driven strategies for better recovery. With active logging and meta-analysis of fraud data, companies can improve forensic investigation outcomes. 

Reach out to our fraud prevention experts at +1 416 962 0542, E: support@merchantrms.com, and strengthen your payment infrastructure through advanced technology solutions. Request a free demo today, to unlock the power of MerchantRMS data-driven fraud management.