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As more and more consumers opt for swiping credit cards rather than use cash, there has been a steady increase in the incidence of fraud with more criminals using stolen or counterfeit cards.
While the use of counterfeit credit cards isn't new, their use has exploded in recent years as computer hackers steal millions of records from major retail stores and rings of thieves develop new ways to steal data. Major data breaches have coincided with a growing black market that connects sophisticated hackers to identity thieves making hundreds of fake cards to withdraw cash or buy goods.
In other instances, devices are inserted into ATM slots and other card readers (for example, gas station pumps) to copy the numbers and financial codes contained in the magnetic strips. The crooks then retrieve the devices or, using Wi-Fi, draw information from them into a laptop or other device. Encoders are used to transfer that information onto newly created cards.
The introduction of chip-and-PIN (EMV) cards offers some solutions to the problem. These cards come with an embedded security microchip in addition to the usual magnetic stripe. To make a purchase, the cardholder inserts the card into a chip reader slot in the payment device. This improves security for two reasons. One, it eliminates the risk of the card's magnetic stripe being skimmed and stolen. Two, the data encrypted on the chip is nearly impossible to replicate, as it is constantly changing.
Still, if your company accepts cards, it is your responsibility to join the fight to stop the use of counterfeit versions. If you aren't diligent in efforts to avoid fraudulent charges, you stand to lose on several fronts:
Given the risks, you should take steps to protect your company. Set up a policy and make sure everyone on your staff who handles credit card transactions is familiar with the guidelines.
To formulate a strong policy, include the following actions, particularly if you haven't yet adopted EMV card readers:
Verification of Transactions in Person
Bottom line: It's more important to make sure that credit card sales are valid — not sales that will be subject to chargebacks in the future.