ST. PETERSBURG, Fla.—All the attention being paid to preventing hackers from stealing card credentials may have credit unions overlooking some old-school fraud that’s likely rising, asserts one payments analyst.
Just as EMV has turned crooks’ attention to easier avenues for card crime—such as ATM skimming and card-not-present fraud—criminals are now stepping up efforts in applying for credit cards using stolen consumer personal data.
“Everyone is paying attention to stolen card credentials, because new breaches come up all the time, it is a recurring theme,” said Brian Scott, senior vice president of business alliances at PSCU. “But one area I am not certain credit unions are focusing on is the fraud that happens before a card is issued. Application fraud is growing–more criminals are filling out fraudulent applications for credit cards.”
25% Of The Fraud
Scott said this type of fraud represents about 25% of the total card fraud in the U.S. marketplace and should climb as EMV takes greater hold among merchants and issuers across the country. “With EMV, fraud is shifting and this is one area fraud is shifting to.”
Scott said that when PSCU staff visit credit unions they have recently found that monitoring for this type of fraud is not something cooperatives to which CUs are paying a great deal of attention.
“But if 25% of your fraud is happening because you are accepting fraudulent applications and issuing cards off that data . . . And then you are only spotting it when the fraud comes through on the actual card, this is fraud that can be stopped before it even starts,” said Scott.
Brian Scott, PSCU
Scott believes that other “headline-grabbing” types of card fraud—like the big data breaches and the rapid rise of card-not-present fraud—are distracting credit unions.
“Yes, those kinds of things make the news, and fraudulent card applications generally do not,” said Scott. “But fraudsters are getting smarter, and they are getting better at stealing personal information and making that data look legitimate. So they are finding it easier to just get the issuer to give them a credit card.”
A growing number of data breaches in the last year have focused on stealing consumers’ personal information, and not on obtaining card data.
“If I am a crook, I can go to a credit union with my stolen information, get a credit card and then often instantly use it,” said Scott.
Attention Needed
So what should credit unions do?
“Credit unions see the revenue potential in credit cards and I think sometimes they get lackadaisical in their approval process, not carefully validating the information that is actually provided in an application,” said Scott. “Like I said, fraudsters are getting better at providing information that looks good on an application, so processes—and attention—here have to be improved.”