This post was previously published on February 23. 2016. It has been updated as of June 1, 2016.
Fraud is becoming more and more common. In fact, according to a report released recently by the Ponemon Institute, 43 percent of companies have experienced a data breach, a figure that represents a 10 percent year-over-year increase.
While the growing U.S. adoption of EMV security technology will likely reduce counterfeit card fraud over time, in the near term industry experts are finding that just the opposite is occurring.
“Card fraud is on the rise, and credit unions and their members need to remain vigilant,” said Bill Freer, Risk Manager for CO-OP Financial Services.
Freer notes that many believe card fraud is increasing today because fraudsters are accelerating their efforts to capture magnetic stripe data before EMV technology replaces the mag stripe for good.
“However, even when that day comes, consumers should remain on alert,” he said. “The fact is that the way fraud is carried out is quickly changing today, and consumers need to both understand this paradigm and take the right steps to protect themselves going forward.”
Card Fraud is Getting Harder to Detect
One important trend impacting consumers, Freer says, is that increasingly fraudulent transactions are taking place right under the cardholder’s nose. He cites footprint fraud, whereby a fraudster makes counterfeit purchases in close proximity to the cardholder’s home, as a growing trend.
“Footprint fraud is on the rise because fraudsters have figured out that these transactions blend in with legitimate cardholder purchases,” he said. “Footprint fraud can be difficult for analysts to detect – and cardholders as well, especially if they are only checking statements at the end of the month. This is why it is so important for credit unions to advise members to check card balances and activity frequently.”
Another type of fraud that can easily go undetected is known as friendly fraud. “This is when someone close to the cardholder, such as a child, employee or caregiver, ‘borrows’ – in fact, steals – the card to make unauthorized purchases,” he said. “These transactions may occur in small amounts, but can add up over time, and like footprint fraud can be difficult for fraud analysts to pinpoint. A credit or debit card is like money, so your members need to keep it in a secure location where others can’t access it.”
Freer adds that it is not always the checkout counter that presents opportunities for fraudsters. “ATM fraud and phishing for cardholder data is also increasing, so make sure your members are educated to never give out a PIN when it is solicited over the phone or by email. A legitimate financial institution will never use these communication channels to request a PIN from a cardholder.”
Fraud Prevention at the Speed of Mobile
While protecting PINs and checking in on accounts can reduce member losses due to fraud, Freer emphasizes that new, innovative technologies are now available to arm members with additional protection.
“CO-OP now offers a card management tool called CardNav by CO-OP, a mobile app designed specifically for credit unions that allows members to set very specific parameters around card usage,” he said.
With CardNav, members can limit transactions to specific merchants, geographic areas, dollar amounts and transaction types, receive alerts whenever their cards are used, and even deny transactions that occur outside the parameters they have set.
“CardNav also allows members to turn cards off when they aren’t in use – and back on to complete a transaction,” said Freer. “And as a mobile app, it can be set up and managed right from the member’s smartphone – and can even be programmed with a ‘follow me’ setting that authorizes only those transactions that occur in close proximity to that phone.”
Ultimately, Freer says tools like CardNav enhance the credit union experience for members by giving them a sense of empowerment, peace of mind and a feeling that the credit union is looking out for them.
“With CardNav, members have the power to prevent fraud from happening in the first place,” he said. “And anyone who has suffered from card fraud knows, even when caught early, it can be very inconvenient. For starters, cards need to be cancelled and new ones issued, which can leave the member without a debit or credit card in the interim.”
He continued, “Time is of the essence whenever card fraud occurs. And since many consumers today keep their phones with them constantly, it only makes sense to leverage these devices in the fight against fraud. Tools like CardNav do just that, placing the power to stop fraud right at your members’ fingertips.”