Credit card fraud seeks to target the holders of genuine credit cards. These include among
others identity theft, cloning of credit cards and misusing them. There is another
adverse side to credit card fraud that targets people making payments online.
This kind of fraud is called merchant credit card fraud.
Cashless transactions have become
vastly popular. Most internet transactions, especially those with regard to payments
require the user to make the payment either through internet banking, credit or
debit cards. When a credit card is used, they are directed to merchant
gateways. The authenticity of merchants must be checked. A sizeable number of credit card fraud occurs by way of fraudulent merchants.
- Fake Merchants
Fake merchants get authorized to
process credit cards by fraudulent means. The merchant gets the following
essential and confidential information with regards to a credit card while
processing them:
- Name of the holder
- Credit Card Number
- Date of Expiry
- CVV – the three digit code that appears in the rear of the card
Where merchants are fraudulent,
they misappropriate the information and may use the same for charging the
credit cards heavily. The credit card holders are later shocked to see their
accounts get ripped off by huge amounts.
- Misusing stolen information for counterfeit cards
Credit card fraud may get more
complex, when the stolen card details do not stop with one time swipe and
misuse. The information may be overwritten on stolen credit cards which are in
the possession of scammers, so that counterfeit cards can be created. A number
of fake credit card makers exist in the black market, where credit card fraud
is committed in both offline and online transactions.
- Illegal partnership with other merchants
The stolen information is passed
on to other players in the trade who may use it for other purposes including
opening new lines of credit. They may proceed to carry out financial
transactions on these new lines. Whenever a company applies for credit card
processing, the banks as well as the private credit card issuers must check for
duplicates before authorizing them.
In cases of merchant credit card fraud, it is
the bank that loses in most cases, since the credit card user cannot be held
liable. Fake merchants also resort to telling the bank that some transactions
were fraudulent and that they are not able to transfer money.
The following safety measures may
help in avoiding merchant credit card fraud to an extent:
- Due diligence before offering merchant status
Banks must satisfy themselves to
the transparency and physical existence of the merchant before according them
the status of authorized merchants.
- Awareness to be created among internet users to use safe gateways
Internet users must look for safe
and trusted payment gateways. For example, verified by visa is a seal of
security which conveys to the customer that the merchant or the credit card
processor is genuine.
- Stress on two factor authentication
A payment processor which uses
two factor authentications must be preferred to conventional ones. This is
because it is possible to steal login credentials whereas a unique passcode is an
additional layer of security.
