Why Credit Card Fraud Still Exists

by | Sep 24, 2020 | Uncategorized

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If you have ever been the victim of credit card fraud, you know that sinking feeling in your stomach when you receive a call stating that your credit card has been compromised. Immediately questions begin swirling around in your head. “Where did I last use my credit card?” “Could it have been stolen by the waiter at that restaurant?” The truth is, it’s not always the result of someone at a store or restaurant stealing your number. There’s a good chance you have become the victim of credit card scams without even knowing it. There have been numerous data breaches in recent years which have resulted in millions of consumers being victimized by fraudulent transactions. Additionally, there are a number of online sites that are fraudulent and could result in credit card and identity theft. So, what exactly is the problem and what can be done about it?

In recent years, much of the world has shifted from magnetic strips to computer chips in credit cards. These chips make it more expensive and difficult for thieves to clone cards. However, the United States has been slow to make the switch, which has caused an increase in compromised accounts. In fact, the majority of credit card fraud is the result of stolen magnetic strip data, which is commonly used to create counterfeit cards. In 2015, major credit card associations tried to tackle this problem by instituting new rules that would make it more expensive for merchants to continue allowing customers to swipe their credit cards. The problem, however, was that banks weren’t quite as quick to replace their customer cards with chip-enabled cards. Furthermore, countless merchants and retailers were slow to adopt a new payment system that would accept chip-based cards. This brings us to today, where the U.S. Federal Reserve estimates that nearly 40% of in-person card payments are still being processed using a magnetic strip rather than a chip.

Just last year, a major hack took place that compromised millions of people’s credit card data. “BriansClub” is one of the largest underground stores for buying stolen credit cards. Though hackers themselves, they too got hacked and more than 26 million credit and debit card records were stolen. Researchers studying the case found that more than 84% of the magnetic strip cards were sold to thieves versus 35% of chip-based cards. The research was clear- cards without a chip were in much higher demand because they are less secure.

NYU researchers looking into the hack discovered that BriansClub had made close to $24 million in the past four years which is why hackers were so eager to get into this database. It also exposed the supply and demand chain for credit cards with and without a computer chip. It is much easier for thieves to copy and steal information from a magnetic strip, which in turn makes it possible to make purchases online without an actual card. Also known as a CNP (card not present) account, hackers have shifted to online purchases.

There is no doubt that credit card fraud still exists in part due to the United States’ slow action in switching to computer chip cards. Retail chains and restaurants all over the country still allow customers to swipe even chip-based cards, which opens the door for credit card fraud.

Your business is important and that’s why it’s recommended to work with a trusted cyber security partner like Contextual Security. We offer a personal, customized plan to help your business navigate cyber threats and we are committed to helping you develop a plan that fits your needs and budget. To learn more about our services, check us out at contextualsecurity.com or call and speak with one of our knowledgeable representatives 844-526-6732. You can also email us with any questions at [email protected].