Earlier this month, Walmart customers were warned of debit card fraud. It is just the latest story of how credit/debit card fraud is affecting consumers, and one of the reasons why the switch was made to the new chip cards, although it is questionable just how effective the new system will be in combatting fraud.
With the holiday season around the corner, we’re likely to see a surge in fraudulent activity, even with the roll out of the new chip-embedded card system. The best way for companies to combat potential fraud is to understand where fraud is most likely to happen, as well as the demographics of victims. To address those issues, online fraud detection company Sift Science released its United States of Fraud report.
The report looked at online fraud behaviors, using machine learning to analyze more than a billion transactions by using shipping and billing addresses. What did the report find?
Southern states have the highest rate of shipping address fraud, while the west equaled their southern counterparts in billing address fraud. The lowest overall fraud tends to be in the Midwest. Perhaps not surprisingly, the report also found that men are more likely than women to be fraudsters while the elderly are the most likely to be the victims of fraud. Finally, fraud isn’t necessarily a big-city crime, as the Sift Science blog pointed out:
Our research found that contrary to what we might assume, orders shipped to urban areas were no more likely to be fraudulent than the average order.
Miami, New York City, Los Angeles, and Philadelphia all show a higher than average fraud rate
However – San Francisco, Boston, Dallas, and Chicago have lower fraud rates than average.
In fact, the blog continued, in a number of states, smaller communities were more likely to have the higher rate of fraud than their same-state larger metro areas.
This report gives us a clear vision of where and how fraud is happening, but unfortunately, it is a security issue that businesses can’t combat easily. In fact, the FBI released a warning about the new EMV standard and the risks involved:
Although EMV cards provide greater security than traditional magnetic strip cards, an EMV chip does not stop lost and stolen cards from being used in stores, or for online or telephone purchases when the chip is not physically provided to the merchant, referred to as a card-not-present transaction. Additionally, the data on the magnetic strip of an EMV card can still be stolen if the merchant has not upgraded to an EMV terminal and it becomes infected with data-capturing malware.
How can businesses protect their customers from being victims of fraud? Businesses should be encouraged to make the switch to the new system as soon as possible and insist that customers use their PIN in making transactions.
Sue Marquette Poremba has been writing about network security since 2008. In addition to her coverage of security issues for IT Business Edge, her security articles have been published at various sites such as Forbes, Midsize Insider and Tom's Guide. You can reach Sue via Twitter: @sueporemba