MIAMI, Fla. - Card fraud usually refers to credit cards, but unfortunately, debit card fraud is starting to catch on, according to one cards processing expert.
JM Rambaud, executive vice president of Fiserv EFT, talked about how to chart an effective debit card fraud risk-management course at SourceMedia’s 20th Annual Card Forum & Expo.
Self-service gas stations have long been used to test counterfeit cards before trying them at major retailers, but now web-based retailers are also being used to test fraudulent cards out, too, Rambaud said.
Another piece of the cards fraud puzzle: using counterfeit data to purchase gift cards, and then the gift cards are either used to make purchases or they are sold.
“There is a lot of impact in terms of what is happening today. Merchants suffer breach,” Rambaud said. “Counterfeit activity occurred as a result. Fraud transactions occur globally. A single person can wreak havoc.”
Currently, there are many risk and fraud challenges, Rambaud said.
“U.S. debit card transaction volume has surged over the past few years,” he said, “with debit cards sustaining nearly 20% annual growth and continuing to outgrow credit card usage.”
Rambaud said that because of this high usage, it is estimated that issuers will experiences losses of $2 billion before 2010 unless they implement “enhanced controls to prevent fraud losses from mirroring transaction growth.”
“Still, credit card fraud is the most common fraud,” Rambaud said, adding up to 26% of fraud, “followed by phone or utilities,” totaling about 18%, he said, followed by bank fraud at 17%.
“Other significant categories of identity theft reported by victims were government documents and benefits fraud and loan fraud,” he said. “Fraud is still the No. 1 priority for financial institutions.”
Cardholder awareness is very important when trying to prevent fraud, Rambaud said, calling the cardholders “the first line of defense. Education, awareness and notification are key.”
But it can’t stop there, he stressed. “There is still more that can be done,” Rambaud said. “There is an increased need for businesses to mitigate fraud. There is a need for more intelligent risk controls. There is a need for risk investigation services.
“We really have to play an active role in protecting people from the bad guys. We need to help each other in this fight.”
To do this, financial institutions need to develop comprehensive risk management, which includes: a strategy, a framework and a program, he said.
“You need to protect, detect and respond,” Rambaud said. “Go to you risk management team and ask them how they protect, detect and respond. If they can’t answer, you have a problem.”
