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How to Protect Yourself from Credit Card Fraud in 2022

How often do you think about the importance of online payment security every time you make a transaction? Electronic payment has attracted vast attention in recent times. In that respect, the use of credit cards increased extensively over the last few years. But this also gave rise to credit card fraud. Today, payment fraud is one of the principal ethical issues in the credit card industry. Now payment operators and cardholders are searching for efficient means of tackling credit card fraud. In this blog post, we will explain what credit card fraud is and how you can protect yourself from credit card fraud, and how you can reduce your risk of credit card scams.

What is credit card fraud?

The use of digital money is obviously a common scenario in all countries around the world. Digital money pertains to the means of payment in electronic form, which we can call ‘electronic currency’ or even ‘cyber cash’. This money is intangible and is only accessible via computers or other digital devices. Like any standard currency, we use digital money to purchase goods and services.

But, with a substantial increase in the number of credit card holders, the cases of credit card fraud have also been on the rise. Fraud is an activity that aims to gain services, goods, or money by unethical means, hence a serious crime. Fraud essentially involves using deception to dishonestly make a personal gain for oneself and create a loss for another.

There are different types of fraud and it results from many varied relationships between offenders and victims. Examples of fraud include employee fraud against employers, e-crime by people using computers, senior management frauds and overrides, investee frauds (fund diversions and siphoning), investor frauds, related party frauds between business partners, procurement and turnkey project frauds.

There may be several root causes of fraud, such as ineffective internal audit, technology ineffectiveness, culture health of the organization, conflict of interest and lack of Independence, etc.

How does credit card fraud happen?

To tackle credit card fraud effectively, it’s crucial to understand the very mechanism of fraud and how credit card fraud happens. There are numerous techniques in which fraudsters execute credit card fraud. For example, account takeover fraud happens when a perpetrator illicitly obtains access to a user’s personal information, like financial accounts. Once they manage to get this access to a user’s online banking account, they send funds to their own account.

Another method that fraudsters use is creating counterfeit cards. The bad news is that fraudsters are coming up with new methods to create counterfeit cards. This is the practice of illegally copying the magnetic stripe of a legitimate card, and using this data to create a fake card. Although we call them fake, they contain the information of real cards, and these cards are counterfeit cards.

How does credit card fraud affect businesses?

As a matter of fact, businesses undergo digital transformation. They integrate digital technology into all areas of a business, which fundamentally change the ways the businesses operate. Although digital transformation may look different for every business, they understand the need for technology to differentiate themselves from the competition. Establishing trust through digitalization without disruption is increasingly the goal. Businesses need to offer an online experience that instils confidence. Unfortunately, there are several barriers to accomplishing this goal.

credit card fraud detection

Businesses are aware of the prevalence of fraudulent actions in the marketplace. But it turns out that business executives aren’t so confident about their ability to protect their company as well as their customers from fraud. Experian’s “Global Fraud and Identity Report” (2018) found that 54% of businesses were only ‘somewhat confident’ in their ability to identify fraudulent activity compared to only 40% who were very confident.

We can assess the impact of fraud on businesses from 3 perspectives. The most obvious way in which fraud can affect a business is financial loss. Secondly, a company that is subjected to fraud is normally painted in black for investors and also business partners. It means that fraud incidents lead to significant reputational consequences on the impacted organization. Additionally, credit card fraud can result in distorted markets where perpetrators gain a competitive edge and push legitimate businesses out.

Credit card fraud statistics

Make yourself familiar with these 17 credit card fraud statistics.

  1. The Federal Trade Commission’s “Consumer Sentinel Network Data Book” (2020) reflects 4.7 million credit card and identity theft reports, an increase from 3.2 million reports in the 2019 edition.

  2. According to LexisNexis Risk Solutions’ “True Cost of Fraud Study: E-commerce/Retail” (2020), medium and large U.S. retail merchants with only physical goods reported 44% of their losses were due to card-not-present fraud and identity theft, while only 33% were from stolen credit cards.

  3. According to the Aite Group, 47% of Americans experienced financial identity theft in 2020.

  4. U.S. Identity Theft: The Stark Reality” report by GIACT found that losses from identity theft cases cost $502 billion in 2019 and increased 42% to $712 billion in 2020. Another interesting fact is that the highest percentage of consumers who were victimized in 2020 were between 35 and 44 years of age and accounted for 30% of all identity theft victims.

  5. The most common types of identity theft in 2020 was government documents or benefits fraud with 406375 reports, followed by 393207 cases and Loan or lease fraud and other identity theft with 558119 reports.

  6. Credit card fraud resulted in more lost dollars than debit cards in 2020, with $149 million in total losses, that debit cards resulted in a total of $117 million lost in 2020.

  7. By 2025, the United States is projected to reach $12.5 billion in card fraud losses.

  8. Organisations with set fraud prevention programs reduced their fraud attack response expenses by 42% and their remedy expenses by 17% compared to Organisations without these measures in place.

  9. 60% of companies that conducted an investigation after a fraud attack ended up in a better place, only 56% of actually conducted investigations at all.

  10. Card not present (CNP) fraud levels continue to rise year over year in Europe. Within the Single Euro Payments Area (SEPA), in 2018 CNP fraud accounted for €1.43 billion in fraud losses which is 17.7% higher than in 2017.

  11. The total value of fraudulent transactions conducted using cards issued within the within the Single Euro Payments Area (SEPA) in 2018 was around €1.8 billion.

  12. In UK, unauthorised financial fraud losses across payment cards, remote banking andcheques totalled nearly £784 million in 2020, a decrease of 5% compared to 2019.

  13. E-commerce fraud still represents 50% of total UK card fraud losses at £310 million, as criminals exploit personal and payment details that are retained by an ever-increasingly connected business landscape.

  14. Banks and card companies in UK have prevented £1.6 billion in unauthorised fraud in 2020. This represents incidents that were discovered and prevented by firms and is equivalent to nearly £6.75 in every £10 of attempted fraud being stopped.

  15. Cross-border card fraud losses on UK-issued cards accounted for 28% of all card fraud losses in 2016 compared with the global card transaction value of just 12% of all card transaction value for UK cards.

  16. Total fraud losses in the Dutch payment system were nearly €82 million in 2012, and declined to €12.9 million in 2017.

  17. 81% of US companies were targets of some kind of payment fraud attack in 2019, which is the 2nd highest percentage since 2009.

How to prevent credit card fraud?

Here are Swiss Cyber Forum’s three smart tips on how you can increase your credit card security.

1. Avoid websites that don’t use proper encryption techniques

First, look at the URL of the website, and see if it begins with “https” instead of “http”. This means that an SSL certificate is already installed on a web server. This certificate encrypts all the data that is being transmitted. Don’t forget that an insecure website can spread malware or steal your personal data.

2. Try to use only bank-operated ATMs

Fraudsters use hidden electronics to steal your credit card data. In that way, they record the user’s record your PIN number, then get to the cash in his/her account. It is advisable to use bank-owned ATMs when in need of cash.

3. Check your bank statements regularly and reconcile them with the transactions you made

If you see any unfamiliar or suspicious charges, notify your card issuer immediately. Although your bank union will have several security measures to protect your information, you also should be proactive in protecting your personal information. As soon as you inform your ban issuer, they will conduct an investigation on your accounts.

Credit card fraud can be disturbing. But we highlighted 3 precautions you can take to lower the chance of being the victim of credit card fraud.

Final words on protecting yourself from credit card fraud

The convenience of electronic payment made credit cards popular among all users around the world. However, the internet has also produced an increased probability of fraud in credit card transactions. The good news is that with proper cybersecurity measures such as monitoring all transaction records and enabling a fraud alert program (if there is any), you can protect yourself from credit card fraud.

Do not forget to keep an eye on our weekly blog posts to enhance your knowledge. Don’t know where to start? Read our 5 Biggest Ransomware Attacks in History and Cyber Security for Law Firms blogs.