Controlling Credit Card Frauds

Fraud losses can run into billions of dollars. Failure to control credit card fraud can result in massive losses in a credit card company. Credit card franchisors and credit card companies spend millions of dollars in researching solutions to fight fraud. In the process, the credit card transactions have evolved from the old manual sales slips to advance electronic transactions and now moving into the wireless mobile transactions technology. The credit card fraud transactions have also changed in accordance with the technologies

While credit card fraud cannot be total eliminated but it can be controlled. Most credit card companies already have a standard set of internal fraud control parameters. Here I am going to share with you some other good controls that other banks may not be practising.

a. EMV chip credit card

Implementing EMV chip credit card is one of the most effective ways of controlling counterfeit card transactions. Due the state of art technology of the EMV chip credit card, the credit card fraud syndicates have problem in copying the credit card details from the genuine EMV credit card.

Several countries have experienced great success in control counterfeit card fraud using this chip technology.

b. Daily review of credit card transactions

Setting up a fraud control team to review daily credit card transactions has been yielded great success in controlling credit card fraud. With proper training and guidance by the experienced staff, the fraud control team could identify suspicious credit card transactions just by looking and evaluating the transactions. Once a suspicious transaction is identified, the fraud control team will contact the genuine cardholder or contact the card issuing bank (if the credit card is not issued by them) to verify the transaction.

Once the transaction is confirmed fraudulent, the fraud control team or the card issuing bank would immediately suspend the credit card number and issue new replacement card with new credit card number to the genuine cardholder.

To help the fraud control team, the daily transaction reports can be segregated into the following reports:
1. High single transaction amount report.
2. High frequency card transactions report.
3. Not on us card transactions report

c. Authorization

In addition to the normal authorization parameters like high single ticket limit, multiple transaction check, CVC check and POS mode the following checks are:

1. Transaction location checks alert – create an alert if two transactions occurred in to two different locations within a short interval.

2. Suspicious merchant alert– creates an alert if the card is spent at a suspicious merchant. In order to get this working, you will need to tag suspicious merchant with a code.

3. Not on us counterfeit card alert – create an alert if a reported counterfeit card is used at your merchant. In most cases, the credit card company has an internal negative list of on us cards. Using the same concept, create an internal negative list for not on us cards. Please note that you are not allow to decline any not on us card transactions but you can force a referral to the card issuing banks.