How Data Breaches Increase Card Spinning and Credit Card Fraud
Lately, it seems like data breaches are a common occurrence. There’s hardly a quarter that goes by without some large company reporting a major breach of sensitive cardholder or personal data. As a consumer, there’s an understandable feeling of anxiety and stress whenever a new breach is announced as their fear and risk of identify and credit card theft increases. But what about the merchants who accept credit cards? They might have even more reason to fear these kinds of breaches. The fact is, data breaches increase identify theft, card spinning, credit card fraud, and other types of nefarious fraudulent activities.
As an example, the type of personal information obtained by hackers through these data breaches could be used to steal identities and establish fraudulent credit cards. Those fraudulent cards are often tested by requesting a transaction authorization through a merchant’s shopping cart. That authorization results in a transaction fee for the merchant, which when performed in bulk, can add up to a substantial amount. From there, the tested fraudulent card is fenced on the black market and is then used to make purchases from legitimate merchants.
By the time the identity theft victim discovers the fraudulent transaction and reports it, the fraudster is already in possession of the merchandise. In turn, a chargeback will almost certainly be initiated, leading to the funds being reversed, and leaving the merchant on the hook for the cost of the loss of goods, the processing fees associated with the transaction and the cost of the chargeback.
What You Can Do To Help Your Merchants Protect Themselves
This scenario is precisely why we built iSpyFraud. iSpyFraud is a rules-based, real-time monitoring solution that enables your merchants to defend against suspicious transaction activities, by setting parameters based on:
- Transaction count
- Transaction amount
- IP address
- User location
- Credit card number
- Credit card brand
By customizing and configuring the filters to identify transactions that are suspicious, merchants can avoid the frustration and cost of being a card spinning victim.
Additionally, there are several best practices your merchants should consider implementing, such as:
- Review unusually large orders prior to shipping
- Review rush orders for high priced goods
- Review orders that are being shipped to a different address than the billing address
- Review orders from foreign countries
- Enable Address Verification Services (AVS)
For more information about iSpyFraud and how it can help protect your merchants, contact NMI today.