Expect more online fraud as new credit cards arrive

October 7, 2015 byJoyce M. Rosenberg
Expect more online fraud as new credit cards arrive
In this Oct. 5, 2015 photo, Allen Walton, owner of the surveillance equipment company SpyGuy Security, poses for a photo as he conducts online business at a coffee shop in Dallas. As more people receive new chip credit cards designed to thwart thieves, the fraudsters who use cards to steal from stores are expected to switch to e-commerce. Walton realizes SpyGuy could be a target as it grows and online fraud increases. (AP Photo/LM Otero)

The new chip credit cards that shoppers are getting in their mailboxes may prevent criminals from stealing from stores, but many thieves are expected to move their operations online. Small businesses could be the most vulnerable.

Online in the U.S. is expected to nearly double to $19 billion by 2018 from $10 billion in 2014, according to Javelin Strategy & Research, a consulting company based in Pleasanton, California. In Britain, which began shifting to chip cards in 2001, rose 55 percent from 2005 to 2008, according to the UK Cards Association, an industry group.

"It's inevitable it will happen," says Steve Platt, an executive vice president at Experian, the credit reporting company.

Banks and other card issuers are sending consumers the new cards because the chips embedded in them are harder to counterfeit than magnetic stripes. Issuers began sending replacement cards in the last year because, as of Oct. 1, merchants are responsible for financial losses from fraud committed with chip cards if they don't use new equipment to process chip card payments.

Small businesses are likely to be most vulnerable because many can't afford the sophisticated software big retailers use to quickly determine whether transactions are fraudulent. Banks no longer have the liability in such cases. And there's another wrinkle that could make operating difficult for businesses that experience a lot of online fraud: Companies that exceed a limit on fraudulent transactions—usually 1 percent of their total transactions—may be barred from accepting credit cards.

Expect more online fraud as new credit cards arrive
In this Oct. 5, 2015 photo, Allen Walton, owner of the surveillance equipment company SpyGuy Security, poses for a photo in Dallas. As more people receive new chip credit cards designed to thwart thieves, the fraudsters who use cards to steal from stores are expected to switch to e-commerce. Walton realizes SpyGuy could be a target as it grows and online fraud increases. (AP Photo/LM Otero)

People attempting to commit fraud online buy card numbers and other information from hackers who invaded computers systems at companies such as Target Corp. and Home Depot Corp. Then they use the stolen card numbers to make online purchases.

To stop the , Allen Walton examines orders at his surveillance equipment company, SpyGuy Security, one by one.

"We manually scan all orders for anything suspicious, like fake names, requests for overnight delivery, and high-ticket orders," says Walton, whose company is based in Dallas. He finds fraudulent orders several times a month.

The increase in online fraud is likely to happen over time, partly because the switch to chip is ongoing and expected to continue into 2016.

"The crooks tend to go where there's less security," says Ken Paterson, a vice president at the consulting firm Mercator Advisory Group in Maynard, Massachusetts.

Technology can help companies root out fraud with software that analyzes a number of factors in a transaction: whether shipping and billing addresses match, whether the order is placed from an unfamiliar computer or device and whether the email address associated with the order is unfamiliar. A high number of transactions in a short time is another red flag, says Tom Donlea, director of e-commerce at Whitepages, a Seattle-based company whose services include address verification for online businesses. When several suspicious factors are present, the software flags a transaction so a retailer can investigate.

EliteFixtures.com, a retailer of lighting fixtures and other products in Hillsborough, New Jersey, has built a fraud detection system that it says has almost completely eliminated fraudulent transactions.

"If someone is ordering a $10,000 chandelier and it's going to a ZIP code where the median home price is $130,000," says owner Steven Annese, "that doesn't make sense."

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Osiris1
not rated yet Oct 07, 2015
Wrong!! Expect MORE in-store fraud. Have you ever noticed that ...just when you pull out your credit cards to slide them across the machine.... it seems that eyes behind you become riveted on your card like it was a super-model's chest. Those same eyes belong to bodies whose hands ALWAYS have a 'smartfone' in them, fingers a clickin and fidgeting. THEY are stealing your PIN codes and card numbers, usually the last 8 as that is YOUR account. The first 8 belong to the issuing bank. That 'smart chip' is in the bank number area so when you slip your card into the new chip reader, the last 8, YOUR numbers, stick out for their clikkin fingers to copy or 5MPixel telecams to photograf. Your PIN is just the icing on the cake for their fingers ..or telemovie cams on same thievin 'smartfones'. Run the movie and pix back slooowly and your money is now THEIRS!. PS..those chip readers ALWAYS hold your card in plain view for the thieves for 40 agonizing seconds so all get a GOOOD look.
Osiris1
not rated yet Oct 08, 2015
The thieves do not need the first 8 numbers inasmuch as most cards belong to area banks, and the thieves already know the bank numbers for them, and all cards have distinctive designs so are instantly recognized as being from this known bank or that. So there you have it! Those 'digital security chips' are just there to facilitate stealing by the same credit card thieves that have bilked consumers for generations. All they need is the numbers and off to the internet they go. Alternatively they can sell the info to terrorists so they can harm our servicemen or allies overseas or even here. The towers were taken down by Saudi terrorists operating on our soil. SOMEBODY bought all those Toyota Land Cruisers that the ISIS and Taliban use in Afghanistan and Iraq and Syria! Perhaps some of the dough came from........YOU! Store clerks are so stupid about this that you would swear they get a cut of the take. So guard your own numbers. Call out that clerk that waves yer card around.

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