How can Companies Detect and Prevent Credit Card Fraud?

There are certain technological tools and security practices that the companies in the U.S. inculcates to detect and prevent credit card fraud. Below are some of the strategies to combat credit card fraud:

1. Use of Advanced Technology: In the U.S. there are fraud detection software that uses machine learning algorithms and AI-powered software to analyze patterns of transactions. This is done in real-time to detect unusual or suspicious activity. Further, companies have started to issue EMV chip-enabled cards which offer more security compared to the traditional magnetic stripe cards. Another use of technology is tokenization and encryption implemented to protect the crucial personal information of their customers during transmission and storage.

2. Stringent Authentication Methods: There is a multi-factor authentication (MFA) system that requires a one-time password (OTP) sent to the mobile number in addition to the card details. As stringent authentication technique, another method used by the companies is biometric verification. Biometrics such as facial or fingerprint recognition are taken for authentication both for online and mobile transactions.

3. Regular Monitoring and Analysis: The companies regularly monitor the transactions for signs of fraud or unusual activity. They look for suspicious spending patterns or transactions done from unfamiliar locations. They further provide real-time notifications to customers to prevent any suspicious activity or transactions that exceed the pre-specified limits.

4. Training and Awareness to Employees: Companies train their staff to recognize any signs of credit card fraud and to maintain the laid down guidelines to handle unusual transactions. Also, customers are educated regarding the protection of their credit card information and their data from unfamiliar emails, phone calls, or texts. Customers are also made to understand how to recognize suspicious fraud.

5. Collaboration and Information Sharing: Companies should collaborate with other businesses and financial institutions to stay updated regarding recent trends and techniques in fraudulent activities. Also, the law enforcement agencies must be informed to investigate any fraudulent activities.

Companies, by implementing these strategies, can detect and prevent credit card frauds, protect their customers, and build trust among their customers for their financial transactions.

Credit card fraud is a form of theft where a fraudster makes a transaction by using another person’s credit card. It is a kind of identity theft where unauthorized transactions occur by either charging purchases to the account or withdrawing funds from the account. In some cases, this can be an incident of outright theft when the fraudster steals the credit card or its related information. It is one of the common types of bank fraud as it affects approximately more than 151 million adults (65% of the cardholders) in a single year in the US alone. As credit cards are the most common mode of payment in the US, credit card fraud is also common. Further, the fraudsters can easily take control of the card, increasing these thefts.

The U.S. Federal law (15 U.S.C. §1643) has put a limit on credit of $50 to cardholders for credit card theft, but most banks can waive this amount if the cardholder signs an affidavit explaining the theft. As of 2023, the Federal Trade Commission has mentioned that credit card fraud has become the most common identity theft in the U.S.

Key Takeaways

• Credit card fraud is when a fraudster attempts unauthorized purchases using another person’s credit card.
• In the U.S., millions of credit cards or their numbers are stolen every year accounting for billions of dollars in illegal activities.
• The federal law states that a cardholder is limited to just $50 for credit card fraud and the theft must be properly justified and reported and proper measures should be undertaken.
• There are third-party theft protection services that are expensive and they follow the same procedure which can be followed by any individual.