How Has Fraud Evolved?

Over the past few decades there has been a shift in how criminals target organizations and their customers. Due in large part to advances in technology, especially with the continued growth of the online marketplace, businesses have to constantly fight fraud in order to protect their own interests as well as their customers’ privacy. Enhanced identity verification techniques make it easier for organizations to keep fraud out while, at the same time, improving the overall customer experience. Below are some ways that fraud has evolved and the steps that are being taken to prevent it.

Changes in the Fraud Landscape

The arrival of ecommerce solutions and the willingness of consumers to shop for products and conduct business online have changed the game for retailers and financial service providers. In addition to criminals shifting from passing bad checks to replicating credit cards, they have also benefited from the amount of information now available to anyone with an Internet connection – especially the valuable stolen identity information currently available for purchase on the Dark Web.

The number of online scams committed continues to grow exponentially. The U.S. Federal Trade Commission received more than 325,000 complaints related to fraud, identity theft, and other scams in 2001 (page 5) – a number that soared to more than 2.5 million complaints in 2014 alone. Identity theft resulted in the highest number of complaints last year and was followed closely by impostor scams. The Internet has allowed fraudsters to gain a greater level of anonymity while attempting to trick consumers into providing account information that can be used to commit fraud.

An Increase in CNP Fraud

Card-not-present (CNP) fraud is a type of fraud involving payment transactions. It can refer to the unauthorized use of an account number, card security code (if required by the merchant), and an accountholder’s address to pay for products or services online or over the phone. A recent white paper by the Smart Card Alliance cites CNP fraud as accounting for 16.1 percent of total losses from fraud as a whole.

As more countries adopt EMV card technology, CNP fraud becomes a growing problem for businesses. While EMV card readers improve security with chip-and-pin requirements in stores and other physical locations, fraudsters are still able to use an account number and other identifying information to bypass safeguards online. Because of this, organizations around the world are employing more robust identity verification procedures to stop fraud in its tracks.

This is especially important for businesses and institutions operating in the United States. EMV requirements are rolling out and organizations can take necessary steps now to prepare for an anticipated rise in CNP fraud. To learn more about the evolution of fraud and the relationship between EMV adoption and CNP fraud, contact a representative at IDology today. Connect with an expert by phone at (866) 520-1234 and ask about setting up an online demonstration of IDology’s fraud prevention solution.

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