From Skimming to Social Engineering: The Evolution of Plastic Card Fraud and How Credit Unions Can Fight Back

by Ariella Davis, Mainsail Trim

The evolution of plastic card fraud from the 70s to now has been nothing short of dramatic. In the early days of plastic card usage, fraudsters used to employ basic techniques like skimming and cloning, but with advancements in technology, fraud has become much more sophisticated and complex.

One of the most significant developments in plastic card fraud is the rise of online fraud. As more and more transactions move to the digital space, fraudsters have found ways to exploit vulnerabilities in the system. Online fraud can take many forms, from phishing scams to malware attacks, and it can be difficult to detect and prevent.

Another trend that has emerged in recent years is the use of social engineering to target unsuspecting victims. Fraudsters may pose as a trusted entity, such as a bank or government agency, to trick people into revealing sensitive information. These attacks are often highly convincing, and even savvy individuals can be fooled.

Credit unions can take several steps to control their losses from plastic card fraud. One approach is to invest in advanced fraud detection and prevention technologies. These solutions use artificial intelligence and machine learning algorithms to identify suspicious behavior and flag potential fraud. Additionally, credit unions can establish robust internal controls and protocols to prevent unauthorized access to card data and to respond quickly to potential breaches.?

Most card issuers utilize a third party to monitor card activity for suspicious or unusual activity. One of these modules is a behavioral analysis. This involves the vendor comparing the fraudulent activity to legitimate activity to make the determination if it is out of pattern. There is also AVS (Address Verification Service), CVV, CVV2, CVC & CVC2, Name matching, 3D secure. All these tools can help your credit union limit your card losses if utilized correctly. During our (Mainsail) audits of plastic card losses, our biggest issue is identifying out of pattern behavior. We will typically look at the history of activity 60 to 90 days prior to the start of the fraud. If, for example, the member doesn’t use their card for online purchases yet the fraud is all online, we would consider that out of pattern and expect the vendor monitoring the activity to make that same determination. Unfortunately, this is something that needs involvement from the credit union. You have to take the time to look at the fraud and the legitimate activity and make the determination that it is out of pattern and then bring it to the attention of your vendor. Otherwise, nothing will change. There may be adjustments that can be made to help identify and stop fraud sooner.

Education and awareness are also crucial in the fight against plastic card fraud. Credit unions can provide training to their employees and members to help them recognize common fraud schemes and avoid falling victim to them. By working together, credit unions and their members can help reduce the impact of fraud and protect their financial assets.

In conclusion, plastic card fraud has evolved significantly over the past few decades, and credit unions must be vigilant to protect themselves and their members from the ever-changing threats. By leveraging technology, establishing strong internal controls, and providing education and awareness, credit unions can mitigate their losses and keep their members safe.

Sources:

1. https://www.bai.org/banking-strategies/article-detail/the-evolution-of-credit-card-fraud-and-how-to-fight-it
2. https://www.cutimes.com/2020/10/05/3-ways-credit-unions-can-fight-card-fraud-in-2021
3. Mainsail Trim

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