With the rise of credit card and debit card usage and the growth of e-commerce transaction volume, there has been a serious increase in operations that exploit user negligence to cause harm to customers.
So what is Fraud?
Fraud means carrying out a transaction at a merchant or ATM using someone else's credit card or debit card in order to obtain unjust gain, thereby causing loss to the genuine cardholder, the merchant, or the bank.
There are basically 2 types of Fraud.
Fraud committed in a physical environment (CP-Card Present Fraud)
Card present transactions involve copying the information (track data) held on a card's magnetic stripe or chip when it is read by a POS terminal or ATM and producing a new card with the same card data, or physically using a card that has genuinely been stolen from the user. The card and the fraudster are physically present at the merchant or ATM. This type of fraud is mostly carried out with lost, stolen, or copied (counterfeit) cards, largely via the magnetic stripe and without a PIN.
Fraud cases occur most often at jewelers, stores selling mobile phones and mobile top-ups, electrical/electronics stores, grocery stores, and gas stations, as well as at ATMs. Although the transition to Chip and PIN (Chip & PIN) led to a significant decrease in 'Card Present' fraud, cash withdrawals made with counterfeit cards at ATMs increased sharply.
Fraud cases carried out in the virtual environment (CNP-Card Not Present Fraud)
In Card Not Present Fraud transactions, the card and the fraudster are not physically present at the merchant. The transaction is carried out either by the merchant keying the sensitive card data (card number, expiry date, security code (CVV2), and PIN) into a POS device (MO-TO, Mail Order-Telephone Order fraud), or by the fraudster entering it through a website (virtual POS fraud).
The most effective way to prevent CNP fraud is a strong fraud prevention (Anti-Fraud) software system together with an experienced fraud team. Fraud prevention software, with its rule-based and advanced filtering systems, is highly effective at catching fraud cases. Fraud software can catch fraud cases right after a transaction takes place, or detect and block them before the transaction is even completed.
What needs to be done to protect against Fraud?
We can list the main practices that should be followed to minimize fraud rates through fraud control as follows:
- The security code (CVV2/CVC2) printed on the back of cards is information that cannot be obtained even if the card is copied. Checking this code is one of the basic fraud control methods.
- Thanks to fraud control, a card and a fraudster that have committed fraud once have almost no chance of doing so a second time. Because the card and person identified by the system cannot carry out a second transaction on the same site, and since this information is shared among other e-commerce sites, they will not be able to transact on another online store either.
- Verifying that orders are placed from a valid IP address, identifying the domain address, and requesting detailed information from the bank in cases that cannot be determined are among the key points of a fraud control system.
- It is important to block the card if the card details (card number, CVV2, and expiry date) are entered incorrectly more than twice.
- It is important for transactions to be carried out via the chip reader with a PIN entered.
- For chipless cards, the card's physical security features (ultraviolet light features, micro-print border, logo, signature strip, etc.) should be checked.
- For PIN-less transactions, identity verification should be carried out in detail.
- For PIN-less transactions, comparing the signature on the card's signature strip with the signature on the transaction receipt can significantly reduce fraud cases.
If fraud is suspected at any of the steps above, the bank should be contacted and the situation reported.
