Combat Credit Card Fraud
3 Ways the Payment Processing Industry Is Combating Credit Card Fraud
Credit card fraud is a very real threat to both business owners and consumers today.
According to a recent Business Insider study, credit card fraud cost retailers $32 billion in 2014, a stark increase from the $23 billion tab in 2013 (1). While there are various sources of fraud, the primary driver behind current domestic cyberattacks comes from the weak link of credit card and debit card security.
The current method of processing credit and debit card transactions, which uses the magnetic strip on the back of the buyer's card, lacks protective measures. But as the threat of credit card theft continues to grow, the payments industry is taking necessary steps to combat hackers' efforts to illegally obtain customer information.
Listed below are three ways the payment processing industry is mitigating credit card fraud:
- Europay, MasterCard and Visa technology: The U.S. is scheduled to undergo a liability shift Oct. 1, 2015. New industry guidelines are being rolled out to better identify who is responsible for any financial liability should a breach occur after the deadline. The least secure party in the payment processing chain that isn't EMV-compliant, or able to process the new chip-based credit cards, may be responsible for payment fraud. The new EMV cards have an embedded chip in the middle of the card that customers dip into a payment processing terminal. The chip contains the sensitive customer data and is much more difficult to fraudulently create.
- Point-to-point encryption: The new EMV cards coupled with point-to-point encryption better serve to secure sensitive information at the point of sale. This protection of information is done from the payment terminal all the way to the gateway or acquirer, meaning the entire stream of information during the transaction is protected. This makes it much more difficult for fraudsters to obtain usable data from stores and online. P2P encryption helps protect the entire payment cycle from point A to point B.
- Tokenization: Tokenization is a process where payment information is randomly assigned unique identifiers that have no intrinsic meaning or value except to the payment processor. The process makes it extremely difficult for hackers because any stolen information has no usable data. The idea behind tokenization is to eliminate the sensitive data businesses keep on hand because the more customer information they store, the potential that they become a target subsequently increases.
1. Business Insider, http://www.businessinsider.com/how-payment-companies-are-trying-to-close-the-massive-hole-in-credit-card-security-2015-3 (Mar. 24, 2015)
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