Key Takeaway: Savvy businesses can stand-out from the crowd by advocating safe practices and actively protecting their customers.
Many people think that the latest credit-card technology - the so-called EMV protocol, or “chip” cards – have made them secure from being victimized by credit card fraud. Well, you shouldn’t rest-easy, thinking that your finances are safer now. The recently released Javelin Identity Fraud Study has revealed that the number of identity fraud victims in 2016 increased by 16 percent over 2015 - to more than 15 million consumers. Not surprisingly, the total losses from ID fraud grew by $1 billion to more than $16 billion in the past year.
A significant contributor to the increase in losses resulted from “card not present” (CNP) fraud. CNP is a payment card transaction made where the cardholder does not or cannot physically present the card for a merchant's visual examination at the time that an order is given. eCommerce, phone orders and even digital wallets are examples of CNP. During the first year since chip cards became widely used, incidences of CNP have spiked. This trend was not unexpected, as every other major market that had adopted EMV card protocols prior to the US implementation in October of 2015 reported exactly the same phenomenon.
However, exacerbating the anticipated increase in CNP fraud is the growing sophistication of fraudsters, who have innovated increasingly deceptive methods of getting your identity details.
“Phishing” schemes, i.e. – the practice of sending emails claiming to be from reputable companies in order to induce individuals to reveal personal information - have become far more difficult to intuitively detect. No longer do such emails contain egregious spelling errors and obvious grammar mistakes that make them easy to flag. Fraudsters have gotten better at tricking you into clicking on a link in one of these emails. Once you do that on your computer or smartphone, these links deploy malicious software, e.g. “malware” to collect all your data, including PIN and CV authentication numbers as you shop online.
Another trend on the rise regarding identity fraud crimes has been enabled by social media posts. Seemingly innocuous posts on potential victim’s personal pages, such as announcements about your birthday, or a college graduation or reunion, provide savvy fraudsters with some of the information they need to be able to open new accounts in your name. Fraudulent new credit applications account for more than half the increase in identity theft crime last year.
Other trends uncovered by the Javelin study include:
- TOTAL ACCOUNT TAKEOVER (ATO) LOSSES TOTALED $2.3B, a 61% spike from previous year
- Victims paid an average of $263 per loss
- Most New Account Fraud victims don’t discover fraud has occurred until they review their credit report or receive a call from a debt collector.
- But incur higher average losses because it takes them longer (40+ days, on average) to discover the fraud
- But incur lower average losses due to quick discovery of fraud. 78% discover fraud within one week
Tightening fraud prevention and detection at points of transaction is a win-win-win prospect. Business owners and managers win, because losses from fraud are reduced, and profits are increased. The customer wins, because when they transact with you, they know that they have less to fear from being potentially victimized by criminals.
The third “win” is that, as your company begins to gain the reputation as a “safe haven” for customers, you will receive more business as the word gets around and people will come to you BECAUSE you are taking the extra step of protecting their identity data and are ensuring that fraudsters aren’t using their stolen information.
This concept of “retailer, casino, restaurant or banker as protector of my identity” is new paradigm in the world of public transactions. It should not be overlooked or minimized. Individuals’ identities are under assault. News and social media feeds contain a steady stream of stories about personal data being hacked and sold. (In fact, as this article is being written, the current huge, breaking story is about Yahoo potentially having passwords and second-factor identification data stolen from 1.5 billion user accounts.)
No longer do businesses need to hide their fraud prevention practices. Open, overt acknowledgment to clients that “we are making sure no one has stolen your identity” will not only comfort the customer and increase their confidence to transact with you, but will also put fraudsters at notice that they should not attempt to commit the crime in your location(s).