Fraud Update
Fraud Update

   Hypercom officials are calling on the credit card industry to move faster to deter credit card fraud.
   The problem exceeds $4 billion annually and was brought to national attention in late November when the nation's three major credit bureaus suffered losses estimated at more than $2.7 million as a result of alleged identification theft.
   "ID theft and credit card fraud costs everyone," Hypercom officials say. "Everyone pays for it through interchange rates and higher prices across-the-board for goods and services. There's also the no small matter of trust. Our industry is built on trust. Under normal circumstances, the merchant trusts the acquirer to get paid; the acquirer trusts the issuers to get settled; the issuers trust the cardholders, and the cardholders trust the merchants. These crimes are seriously undermining this trust."
   Acquirers in Asia now increasingly require merchants to provide a security deposit of $25,000 to cover the fines they sustain when credit card skimming originates within their merchant base. This is upsetting the relationship between merchants and acquirers, and the relationship between the associations, issuers and the acquirers, according to Hypercom.
   Credit card skimming usually involves a cardholder turning over physical possession of his or her card to a retail or restaurant employee, who then swipes the card through a small, illegal card reader, called a "skimmer." The skimmer copies the data encoded on the card's magnetic stripe. This information is then used to manufacture counterfeit cards that are used to rack up illegal charges. Stolen cards from mailboxes, pick pockets, auto break-ins, etc., are used by criminals to make unauthorized purchases before the real holder of the card discovers the fraudulent purchases.
   Hypercom and other companies offer products that enable credit card information to be captured without the card ever leaving the consumer's eyesight, sharply reducing the chances of skimming and some other types of fraud.
   Fraud isn't a crime that's quickly forgotten, Hypercom adds. Consumers/cardholders are forced to go through months if not years salvaging their reputation and they are denied use of the stolen/skimmed cards. Merchants suffer, too because consumers will avoid any merchant establishment that they think has been even remotely involved in allowing such crimes to take place.
   "The need to bring credit fraud under control, and indeed, eradicate it, demands that the industry take urgent and positive action now," says Chris Alexander, Hypercom CEO.
   ISOs who are armed with a solution that can eradicate, or virtually eradicate these crimes, stands a very good chance of helping the merchant, the consumer and the community at large, and generating revenues, and repeat business in the process. Fraud costs are among the contributing factors in determining interchange rates. Merchants subject to an inordinate amount of fraud may find it too expensive to accept creditcards.
   "We have the technology to stop this criminal activity in its tracks, but we cannot do it alone," Alexander says. "Issuers, acquirers, terminal vendors, merchants and consumers must cooperate and adopt the tools necessary to eradicate this destructive activity."