Credit card fraud is a fact that will likely continue to plague retailers for the foreseeable future. It’s on the rise in the eCommerce arena, according to data released from omnichannel commerce technology and operations company Radial’s eCommerce Fraud Technology Lab.
In Q1 of this year, there was a 200 percent increase in credit card testing, up from 2016. Credit card testing means that stolen credit card numbers are tested with small purchases to ensure the account is valid prior to a larger purchases. Radial’s data also showed that overall fraud is up 30 percent year over year. The highest increases in online fraud since August 2016 were found to be in electronics, entertainment, jewelry and sporting goods.
Radial’s Risk Analytics Manager, Michael Graff, shared with PYMNTS how best to avert future card testing fraud: “There are two key components to a Card Testing Prevention strategy: detection and response. First, retailers must have the sensors or monitoring in place to recognize when a situation like card testing is happening. If the testing is found weeks later in a system or financial audit, it’s too late — the damage has been done. Second, retailers need to have proactive ways of restricting the activity. Your system should be configurable to recognize common data points as velocity attacks, or at the very least allow a manual response where the use of this data can be restricted.”
At the beginning of 2016, the retail industry was hoping that EMV chips would lead to a decrease in fraud. As card present fraud may have decreased over the past year, Radial’s data clearly shows that card-not-present fraud in the online arena is skyrocketing.
Graff explained: “EMV has done a fantastic job at addressing Card Present fraud — the majority of the benefit is always going to be seen here. The debate has been more around how would it affect Card Not Present. What happened was exactly what was expected. Fraudsters migrated from Card Present fraud, because it became hard, and are now focusing on Card Not Present. As much as automation is a key principal in business, fraudsters have adopted this idea as well and are using automation in all phases of the fraud lifecycle. This is driving the increase in card testing and the overall increase in fraud.”
With eCommerce becoming more popular over the past few years, the practice of fraud and its prevention has rapidly changed. As such, retailers have either applied tools to over-reject orders, which decreases customer transaction approvals, or built an in-house fraud team.
Graff also commented on what retailers can do to help further prevention moving forward, in addition to detection and response: “I strongly urge retailers to strengthen their protections when it comes to fraud. Fraudsters are getting more determined, and they are no longer deterred by a measured anti-fraud response. Regular risk and compliance assessments are not enough for today’s clever fraudsters — active fraud management solutions are required to both fend off the threat and protect a good sale.”