Tag: fraud

With more than one-third of customers interacting with a single business in five or more channels and more than 85 percent of consumers using online or mobile to conduct business, omnichannel fraud prevention has become a necessity. Implementing a layered approach to authentication and integrating device intelligence into the process to associate a consumer with a known device are critical components of a fraud mitigation strategy. In addition to providing another layer of validation, verifying a customer through his or her device makes it easier for the customer to interact with the business and is a huge benefit to the overall customer experience. Perspective paper: Protecting the customer experience - The impact of fraud on the customer relationship

Gift cards are the most requested gift item and have been for the last eight years. Merchants love gift cards because they take up very little space and the recipient often ends up spending more than the value of the gift card.

Cont. Understanding Gift Card Fraud By: Angie Montoya In part one, we spoke about what an amazing deal gift cards (GCs) are, and why they are incredibly popular among consumers. Today we are going to dive deeper and see why fraudsters love gift cards and how they are taking advantage of them. We previously mentioned that it’s unlikely a fraudster is the actual person that redeems a gift card for merchandise. Although it is true that some fraudsters may occasionally enjoy a latte or new pair of shoes on us, it is much more lucrative for them to turn these forms of currency into cold hard cash. Doing this also shifts the risk onto an unsuspecting victim and off of the fraudster. For the record, it’s also incredibly easy to do. All of the innovation that was used to help streamline the customer experience has also helped to streamline the fraudster experience. The websites that are used to trade unredeemed cards for other cards or cash are the same websites used by fraudsters. Although there are some protections for the customer on the trading sites, the website host is usually left holding the bag when they have paid out for a GC that has been revoked because it was purchased with stolen credit card information. Others sites, like Craigslist and social media yard sale groups, do not offer any sort of consumer protection, so there is no recourse for the purchaser. What seems like a great deal— buying a GC at a discounted rate— could turn out to be a devalued Gift card with no balance, because the merchant caught on to the original scheme. There are ten states in the US that have passed laws surrounding the cashing out of gift cards. * These laws enable consumers to go to a physical store location and receive, in cash, the remaining balance of a gift card. Most states impose a limit of $5, but California has decided to be a little more generous and extend that limit to $10. As a consumer, it’s a great benefit to be able to receive the small remaining balance in cash, a balance that you will likely forget about and might never use, and the laws were passed with this in mind. Unfortunately, fraudsters have zeroed in on this benefit and are fully taking advantage of it. We have seen a host of merchants experiencing a problem with fraudulently obtained GCs being cashed out in California locations, specifically because they have a higher threshold. While five dollars here and ten dollars there does not seem like it is very much, it adds up when you realize that this could be someone’s full time job. Cashing out three ten dollar cards would take on average 15 minutes. Over the course of a 40-hour workweek it can turn into a six-figure salary. At this point, you might be asking yourself how fraudsters obtain these GCs in the first place. That part is also fairly easy. User credentials and account information is widely available for purchase in underground forums, due in part to the recent increase in large-scale data breaches. Once these credentials have been obtained, they can do one of several things: Put card data onto a dummy card and use it in a physical store Use credit card data to purchase on any website Use existing credentials to log in to a site and purchase with stored payment information Use existing credentials to log in to an app and trigger auto-reloading of accounts, then transfer to a GC   With all of these daunting threats, what can a merchant do to protect their business? First, you want to make sure your online business is screening for both the purchase and redemption of gift cards, both electronic and physical. When you screen for the purchase of GCs, you want to look for things like the quantity of cards purchased, the velocity of orders going to a specific shipping address or email, and velocity of devices being used to place multiple orders. You also want to monitor the redemption of loyalty rewards, and any traffic that goes into these accounts. Loyalty fraud is a newer type of fraud that has exploded because these channels are not normally monitored for fraud— there is no actual financial loss, so priority has been placed elsewhere in the business. However, loyalty points can be redeemed for gift cards, or sold on the black market, and the downstream affect is that it can inconvenience your customer and harm your brand’s image. Additionally, if you offer physical GCs, you want to have a scratch off PIN on the back of the card. If a GC is offered with no PIN, fraudsters can walk into a store, take a picture of the different card numbers, and then redeem online once the cards have been activated. Fraudsters will also tumble card numbers once they have figured out the numerical sequence of the cards. Using a PIN prevents both of these problems. The use of GCs is going to continue to increase in the coming years— this is no surprise. Mobile will continue to be incorporated with these offerings, and answering security challenges will be paramount to their success. Although we are in the age of the data breach, there is no reason that the experience of purchasing or redeeming a gift card should be hampered by overly cautious fraud checks. It’s possible to strike the right balance— grow your business securely by implementing a fraud solution that is fraud minded AND customer centric. *The use of GC/eGC is used interchangeably

Apple Pay fraud solution Apple Pay is here and so are increased fraud exposures, confirmed losses, and customer experience challenges among card issuers. The exposure associated with the provisioning of credit and debit cards to the Apple Pay application was in time expected as fraudsters are the first group to find weaknesses. Evidence from issuers and analyst reports points to fraud as the result of established credit/debit cards compromised through data breaches or other means that are being enrolled into Apple Pay accounts – and being used to make large value purchases at large merchants. Keir Breitenfeld, our vice president of Fraud and Identity solutions said as much in a recent PYMNTS.com story where he was quoted about whether the Apple Watch will help grown Apple Pay.    The challenge is that card issuers have no real controls over the provisioning or enrollment process so they currently only have an opportunity to authenticate their cardholder, but not the provisioning device. Fraud exposure can lie within call centers and online existing customer treatment channels due to: Identity theft and account takeover based on breach activity. Use of counterfeit or breached card data. Call center authentication process inadequacies. Capacity and customer experience pressures driving human error or subjectively lax due diligence. Existing customer/account authentication practices not tuned to this emerging scheme and level of risk. The good news is that positive improvements have been proven with bolstering risk-based authentication at the card provisioning process points by comparing the inbound provisioning device to the device that is on file for the cardholder account. This, in combination with traditional identity risk analytics, verifications, knowledge-based authentication, and holistic decisioning policies vastly improve the view afforded to card issuers for layered process point decisioning. Learn more on why emerging channels, like mobile payments,  call for advanced fraud identification techniques.

Gift card fraud Gift cards have risen in popularity over the last few years— National Retail Federation anticipated more than $31B in gift card sales during the 2014 holiday season alone. Gift cards are the most requested gift item, and they have been for eight years in a row. Total gift card sales for 2014 were anticipated to top $100 Billion. Gift cards are a practical gift – the purchaser can let the recipient pick exactly what they want, eliminating the worry of picking something that doesn’t fit right, that is a duplicate, or something that the recipient just might not want. They are also incredibly convenient, quick, and easy to purchase. The stigma behind gift cards is starting to fade, and it no longer seems as though they are an impersonal gifting option. Additionally, the type of gift cards available has expanded greatly in the last few years. If you are of the procrastinating nature, there are eGift Cards or eCertificates, which can be emailed in a matter of minutes to the recipient. If you are truly unsure what to purchase altogether, you can give an open-loop card, which are usually branded by Visa, MasterCard, and American Express, and can be used anywhere their logo appears. It also seems like a quick win for merchants to carry gift cards. The overhead cost to store them is extremely low because a small box of gift cards takes up very little space. When customers come in to redeem their GC, they usually spend more than the original value of the card itself, thus allowing for additional revenue capture. Something else that merchants have started doing in this big data world we live in is tying gift cards to consumer loyalty programs. Reloadable cards are now linked to a specific customer, who can also tie their credit card to the account, which is automatically charged once their account is below a pre-defined threshold. These new consumer loyalty accounts can be used to track spending history, tailor offers to the specific customer, and continue to expand on the immersive brand experience. Recently, a certain Mexican-themed fast food establishment launched their new mobile app; in the app, you could pre-order food, send and redeem eGCs, and find the nearest location. I don’t even eat at this establishment, but the innovation of their app was so enticing that I installed it the morning it came out, purchased an eGC for my husband, and pre-ordered breakfast. It was extremely easy and convenient, and I got a free taco! Now they have my soul. Okay, maybe not my soul, but they have my credit card data, purchasing preferences, device information, and location, which is almost the same thing at this point. After the experience I found myself asking why other merchants haven’t already done this or why it hasn’t taken off yet. This is a great example of how gift cards and emerging technology are being used as a marketing tool to entice consumers to build up a customer base. In the rare instance that a gift recipient does not actually find value in their gift card (the horror!) there’s a multitude of options for trading them in or redeeming for cash. Some well-known websites for trade-in are Giftcard Granny, Card Hub, and raise.com; it’s also incredibly common to find discounted GCs for sale on eBay, Craigslist, and Facebook groups. A couple familiar names that have recently entered into the mix are Wal-Mart and CoinStar. You can now exchange your physical gift card for cash at a specific CoinStar machines, and if you don’t feel like leaving your home, you can exchange your card online with Wal-Mart, and they will provide you with a Wal-Mart gift card that can be redeemed online or in stores. It’s such common practice that you can find articles on this topic on local, national, and 24-hour news websites. This tremendous revenue booster does not come free of risk, however. We know that fraudsters are clever and opportunistic. They will penetrate every weakness possible and take advantage of programs that are being used to enhance the consumer experience. But are they really stealing all these gift cards for personal gain and taking all of their friends out to their favorite local coffee shop for free drinks? Stay tuned for the second part of this blog that talks more about the fraud risks associated with gift cards and what you can do to mitigate them. Please note: *The use of GC/eGC is used interchangeably.

Reputational impact of fraud It’s all over the news. Hackers are compromising personal information and using that to access customer accounts. It’s critical that organizations have technology in place to distinguish valid customers from fraudsters as quickly as possible. The impact of fraud on the customer relationship requires more elaborate and accurate fraud prevention. Customers have a legitimate expectation that the institutions with which they do business will safeguard their identities, accounts and sensitive data. When fraud or a data breach occurs, that trust can be broken. All the work an institution has done to build its brand image can be damaged suddenly. With the right controls in place, even when customer information is compromised organizations can easily tell the difference between good customers and fraudsters. Listen to what Matt Lane, Experian's 41st Parameter vice president of customer management, says about the reputational impact of fraud theft on an organization: Learn more about the reputational impact of fraud thefts on an organization.

The evolution of identity verification Knowing who you are doing business with isn’t just a sound business practice to protect your bottom line. In many cases, it also is a legal requirement. Identity verification techniques have been evolving over the past few years to meet business priorities beyond fraud prevention, including customer experience, operational costs and regulatory compliance. We recently wrote about the challenges of customer authentication on mobile devices to meeting new business priorities. Fraud prevention tools have responded to these shifting priorities. While extremely fast and very accurate at detecting fraud, they also: Are less invasive to customers Provide a strong return on investment Ensure consistency in compliance and audit Listen to what Matt Ehrlich, Experian fraud and identity director of product management, has to say about how verification techniques have changed: Download our fraud prevention perspective paper to gain more insight on how you can prepare your business.

The news of the latest breach last week reported that tens of millions of customer and employee records were stolen by a sophisticated hacker incursion. The data lost is reported to include names, birth dates, Social Security numbers, and addresses. The nature of the stolen data has the potential to create long-term headaches for the organization and tens of millions of individuals. Unlike a retailer or financial breach, where stolen payment cards can be deactivated and new ones issued, the theft of permanent identity information is, well, not easily corrected. You can’t simply reissue Social Security numbers, birth dates, names and addresses. What’s more, the data likely includes identity data on millions of dependent minors, who are prime targets for identity thieves and whose credit goes frequently unmonitored. According to the Identity Theft Resource Center’s 2014 Data Breach Report, a record 783 breaches, representing 85 million records, occurred from January through September 2014 alone. The breaches have ranged across virtually every industry segment and data type. So where does all this breached data go? It goes into the massive, global underground marketplace for stolen data, where it’s bought and sold, and then used by cybercriminals and fraudsters to defraud organizations and individuals. Like any market, supply and demand determines price, and the massive quantity of recent breaches has made stolen identities more affordable to more fraudsters, exacerbating the overall problem. In fact, stolen health credentials can go for $10 each, about 10 or 20 times the value of a U.S. credit card number, according to Don Jackson, director of threat intelligence at PhishLabs, a cyber crime protection company. The big question: So what now? The answer: Assume that all data has been breached, and act accordingly. Such a statement sounds a bit trivial, but it’s a significant paradigm shift. It’s a clear-headed recognition of the implications of the ongoing, escalating covert war between cybercriminals and fraudsters, on one side, and organizations and consumers on the other. For individuals, we need to internalize this fact: our data has likely been breached, and we need to become vigilant and defend ourselves. Sign up for a credit monitoring service that covers all three credit bureaus to be alerted if your data or ID is being used in ways that indicate fraud. Include your children, as well. A child’s identity is far more valuable to a fraudster as they know it can be several years before their stolen identity is detected. Many parents do not check their child’s credit regularly, if at all. For organizations, it’s a war on two fronts: data protection and fraud prevention. And the stakes are huge, bigger than many of us recognize. We’re not just fighting to prevent financial theft, we’re fighting to preserve trust — trust between organizations and consumers, at the first level, and ultimately widespread consumer trust in the institutions of finance, commerce, and government. We must collectively strive to win the war on data protection, no doubt, and prevent future data breaches. But what breaches illustrate is that, when fundamental identity data is breached, a terrible burden is placed on the second line of defense — fraud prevention. Simply put, organizations must continually evolve their fraud prevention control and skills, and minimize the damage caused by stolen identity data. And we must do it in ways that reinforce the trust between consumers and organizations, enhance the customer experience, and frustrate the criminals. At 41st Parameter, we are at the front lines of fraud prevention every day, and what we see are risks throughout the ecosystem. Account opening is a particular vulnerability, as consumer identity data obtained in the underground will undoubtedly be used to open lines of credit, submit fraudulent tax returns, etc. unbeknownst to the consumer. Since so much data has been breached, many of these new accounts will look “clean,” presenting a major challenge for traditional identity-based fraud and compliance solutions. But it’s more than new accounts — account takeover, transactions, loyalty, every stage is in jeopardy now that so much identity data is on the loose. Even the call center is vulnerable, as the very basis for caller authentication often relies on components of identity. At 41st Parameter and Experian Fraud & Identity solutions, we advocate a comprehensive layered approach that leverages multiple solutions such as FraudNet, Precise ID, KIQ, and credit data to protect all aspects of the customer journey while ensuring a seamless, positive user experience across channels and lines of business. Read our fraud perspective paper to learn more. Now is the time to take action.  http://www.reuters.com/article/2014/09/24/us-cybersecurity-hospitals-idUSKCN0HJ21I20140924

Did you know that privacy policies do not guarantee that your information will be kept private? Most companies use privacy policies to inform customers about how their personal information may be used, i.e. sold, shared, exchanged, not necessarily guaranteeing absolute confidentiality. In today’s increasingly digital world where exchanging personal information – your name, email address, home address, etc. – for access to websites, coupons and the like has become the norm. And, it can be difficult for consumers to understand the value of their personal information. Today is the eighth annual Data Privacy Day, an international awareness effort spearheaded by the National Cyber Security Alliance (NCSA) that encourages all Internet users to consider the privacy implications of their online actions and motivate all companies to make privacy and data protection a greater priority. Since most consumers aren’t fully aware of the implications of sharing personal information, we’re taking a deeper look at what can happen when personal information is shared online. Companies that collect don’t always protect When you share personal information with a company online, that company is responsible for protecting your information. Even data that is seemingly harmless is extremely valuable to cyber criminals, like your email address or your mother’s maiden name for a password reset. When you share this valuable, personal information with a company online be sure to read the company’s privacy policy fine print in order to be certain that your information is not being shared publicly or with outside companies. In some instances, even reading the company’s fine print cannot keep your information safe. Millions were affected last year due to retail and medical data breaches, proving it difficult for companies to protect your data no matter how secure it may seem. Once cyber criminals have their hands on your personal information, you may be surprised at what they can do with it. Cyber criminals patch together your digital profile Bits and pieces of personal information stolen from companies can help cyber criminals patch together a complete picture of your digital identity. They can then use your digital identity to access more important information like your financial records from retail sites that have your credit card information stored. Many consumers leave a trail of personal information on the Internet, leading cyber criminals to steal your identity and your financial information. How to make a difference during Data Privacy Day Here are some tips on how you can increase your privacy online from the NCSA: Think of your personal information like money – value it and protect it. You are often paying for “free” services with your personal information. Before you willingly provide your information to a service, make sure it is a business you trust to handle your information with care. Manage your browser cookies to maximize your privacy and prevent unwanted tracking. Demand that businesses be honest about how they collect, use and share personal information. Be cautious about who you “friend” and communicate with online. Visit our website for more information on identity protection products you can offer your customers.

By: Maria Moynihan Mobile devices are everywhere, and landlines and computer desktops are becoming things of the past. A recent American Marketing Association post mentioned that there already are more than 1 billion smartphones and more than 150 million tablets worldwide. As growth in mobile devices continues, so do expectations around convenience, access to mobile-friendly sites and apps, and security. What is your agency doing to get ahead of this trend? Allocating resources toward mobile device access and improved customer service is inevitable, and, arguably, investment and shifts in one of these areas ultimately will affect the other. As ease of information and services improves online or via mobile app, secure logons, identity theft safeguards and authentication measures must all follow suit. Industry best practices in network security call for advancements in: Authenticating users and their devices at the point of entry Detecting new and emerging fraud schemes in processes Developing seamless cross-checks of individuals across channels Click here to see what leading information service providers like Experian are doing to help address fraud across devices. There is a way to confidently authenticate individuals without affecting their overall user experience. Embrace the change.      

According to a recent 41st Parameter® study, 85 percent of consumers use online or mobile channels to conduct business.

A recent survey reveals that 30 percent of travelers have experienced identity theft while traveling or know someone who has.

By: Ken Pruett The great thing about being in front of customers is that you learn something from every meeting.  Over the years I have figured out that there is typically no “right” or “wrong” way to do something.  Even in the world of fraud and compliance I find that each client's approach varies greatly.  It typically comes down to what the business need is in combination with meeting some sort of compliance obligation like the Red Flag Rules or the Patriot Act.  For example, the trend we see in the prepaid space is that basic verification of common identity elements is really the only need.   The one exception might be the use of a few key fraud indicators like a deceased SSN.  The thought process here is that the fraud risk is relatively low vs. someone opening up a credit card account.  So in this space, pass rates drive the business objective of getting customers through the application process as quickly and easily as possible….while meeting basic compliance obligations. In the world of credit, fraud prevention is front and center and plays a key role in the application process.  Our most conservative customers often use the traditional bureau alerts to drive fraud prevention.  This typically creates high manual review rates but they feel that they want to be very customer focused. Therefore, they are willing to take on the costs of these reviews to maintain that focus.  The feedback we often get is that these alerts often lead to a high number of false positives. Examples of messages they may key off of are things like the SSN not being issued or the On-File Inquiry address not matching.  The trend is this space is typically focused on fraud scoring. Review rates are what drive score cut-offs leading to review rates that are typically 5% or less.  Compliance issues are often resolved by using some combination of the score and data matching. For example, if there is a name and address mismatch that does not necessarily mean the application will kick out for review.  If the Name, SSN, and DOB match…and the score shows very little chance of fraud, the application can be passed through in an automated fashion.  This risk based approach is typically what we feel is a best practice.  This moves them away from looking at the binary results from individual messages like the SSN alerts mentioned above. The bottom line is that everyone seems to do things differently, but the key is that each company takes compliance and fraud prevention seriously.  That is why meeting with our customers is such an enjoyable part of my job.

You’ve heard of the websites that can locate sex offenders near you. Maybe you’ve even used them to scope out your neighborhood. But are those websites giving you the full picture? What if some sex offenders are flying under the radar? According to a recently released study from Utica College, more than 16 percent of sex offenders attempt to avoid mandatory monitoring by manipulating their identity. They use multiple aliases, use various personal identifying information such as social security numbers or date of birth, steal identity information from family members, manipulate their name, use family or friends’ addresses, alter their physical appearance or move to states with less stringent laws. Finding ways to slide under the radar means registered sex offenders could live near schools and playgrounds, or even gain unapproved employment. In one case, 29-year-old Neil Rodreick enrolled in at least four schools in Arizona, posing as a 12-year-old boy. He was finally caught when one school was unable to verify the information on his paperwork. A parallel study conducted by Utica demonstrated that awareness of identity manipulation of sex offenders is low. Of 223 law enforcement agencies surveyed in 46 states, only five percent knew of an identity manipulation case within their jurisdiction. Close to half (40 percent) of respondents said that they had zero cases, indicating that some may not even be aware of this issue. Clearly, additional monitoring is needed. Experian offers sex offender monitoring that conducts an in-depth search of sex offender registries in all 50 states, Washington D.C., Puerto Rico and Guam to help find and identify sex offenders. It also provides notifications when a sex offender is living in or moves to a customer’s neighborhood, or if a sex offender registers under a different name using a customer’s address. Monitoring identity and credit information is also another way to stay aware of sex offenders using one’s personal credentials. Do you feel that current sex offender tracking is working? Are there other tools or systems states should be using to track them? Visit our website for more information on identity protection products you can offer your customers.

Customers see a data breach and the loss of their personal data as a threat to their security and finances, and with good reason. Identity theft occurs every four seconds in the United States, according to figures from the Federal Trade Commission. As consumers become savvier about protecting their personal data, they expect companies to do the same. And to go the extra mile for them if a data breach occurs. That means providing protection through extended fraud resolution that holds up under scrutiny. Protection that offers peace of mind, not just in the interim but years down the line. The stronger the level of protection you provide to individuals affected in a breach, the stronger their brand loyalty. Just like with any product, consumers can tell the difference between valid protection products that work and ones that just don’t. Experian® Data Breach Resolution takes care to provide the former, protection that works for your customers or employees affected in a breach and that reflects positively on you, as the company providing the protection. Experian’s ProtectMyID® Elite or ProtectMyID Alert provides industry-leading identity protection and, now, extended fraud resolution care. ExtendCARE™ now comes standard with every ProtectMyID data breach redemption membership, at no additional cost to you or the member. With ExtendCARE, the identity theft resolution portion of ProtectMyID remains active even when the full membership isn’t. ExtendCARE allows members to receive personalized assistance, not just advice, from an Identity Theft Resolution Agent. This high level of assistance is available any time identity theft occurs after individuals redeem their ProtectMyID memberships. Extended fraud resolution from a global leader like Experian can put consumers’ minds at ease following a breach. If we can help you with pre-breach planning or data breach resolution, reach out to us via our contact form on our contact page.