By Nicholas Cucci
Fluid Pay LLC
Credit card skimming has made a resurgence and is hitting media outlets like crazy. With increased usage of credit cards it's inevitable for fraudsters to keep trying old methods that were somewhat successful. The worst part of credit card skimming is the cardholder is blindsided, particularly when their credit card has never left their possession.
According to the Federal Reserve and Experian, card use is on the rise and won't slow down anytime soon. Average credit card debit rose from $5,516 in 2014 to $6,040 in 2018. Total revolving consumer debt reached $1.057 trillion in March of 2019; the average credit card balance was $6,194. Of the American families that spend more money than they intake, 43 percent borrow and use credit cards to finance the shortfall; and 57 percent of Americans use credit cards for convenience and do not carry over a balance.
Fraudsters typically run in five to seven-year cycles, and they keep recycling old ways to commit fraud.
Credit card skimming occurs when a fraudster places a small device at or within a POS mechanism to steal card information. When a credit card is swiped through a skimming device, the device captures and stores all the details stored on that card's mag stripe. The transaction proceeds as normal, and the cardholder has no knowledge of the theft.
Restaurants and retail locations are among the places where skimming occurs, and this type of skimming is difficult to identify and catch. Retail workers and restaurant employees can be recruited to skimming rings. The devices they are given can be about one-fourth the size of a cell phone. This method is popular because typically when you pay your bill at a restaurant, the waiter walks away with your card and can easily swipe the card undetected through a skimming device.
There isn't much the consumer can do to counteract this type of fraud. However, on the flip side, this is probably one of the easiest methods for banks to catch when multiple cardholders are hit with fraud in the same location. All of the skimmed cards will have the retail/restaurant charge in common.
Skimming at ATMs and gas stations is also prevalent. Why? Everyone takes cash out of the bank and will need gas at some point. These are high-traffic areas with recurring business at any time of day. In this scenario, credit card skimmers are typically placed over the card swipe mechanism on both ATMs and pumps. At ATMs the fraudsters may take a step further by placing a pinhole camera to capture debit card PINs. This is done so fake cards can be made for withdrawing cash from cardholders' checking/savings accounts.
Another reason fraudsters are attracted to gas stations is their vulnerability. By this I mean gas stations typically have universal keys. They are easy to gain access to, the key opens up the pump enclosure, and a skimmer can be installed in less than 10 seconds behind the scenes.
It all starts with us. We need to sell secure solutions and strengthen our relationships with merchants. Fraud is the number one fear of consumers, and it has been basically since the inception of credit cards. Our industry is based on risk. It's our obligation to mitigate that risk.
One of the simplest, most basic ways to prevent this type of fraud is education – education to our clients. Explain to them what to look for and how to check each device they have. This will ensure good habits for the merchant to follow. Remaining proactive is essential to reducing one's risk. This includes training, training and more training. Most merchant sales staff receive entry-level training on how to use equipment and minimal education on how to identify and prevent fraud. Keeping staff updated on prevention will have a positive impact on your customers' profit margins as well as your own.
Nicholas Cucci is the co-founder and COO of Fluid Pay LLC and former director of marketing for NMI. Cucci is also a graduate of Benedictine University and a member for the Advisory Board and Anti-Fraud Technology Committee for the Association of Certified Fraud Examiners. Fluid Pay is a 100 percent cloud-based Level 1 PCI Payment Gateway processing transactions anywhere in the world. Contact Nick at Nick@FluidPay.com.
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