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Emerging Trends in Credit Card Fraud

The COVID-19 pandemic has impacted credit card fraud trends by fueling explosive growth in card fraud activity. Fraud involving existing credit cards jumped 69% in 2021 from the year before, resulting in $9 billion in costs. COVID-19 has moved even more fraud away from physical stores and to e-commerce sites, with criminals focusing on using stolen personal information to make fraudulent purchases online.

Emerging trends in credit card fraud include card-not-present fraud, phishing, smishing and vishing schemes, and account takeover or ATO. Phishing uses emails and links, smishing uses text messages or common messaging apps, and vishing uses voice calls and voicemails to obtain sensitive information. In an account takeover (ATO) attack, an attacker gains unauthorized access to a user’s online account credentials.

Credit card skimming involves using a device to steal credit card information, such as the card number and expiration date, from the magnetic stripe on the back of the card. Criminals can then use this information to make unauthorized purchases or create counterfeit cards. Skimming devices can be placed on ATMs, gas pumps, or other payment terminals and are often difficult to detect.

  • In 2022, the Federal Trade Commission (FTC) received 440,631 reports of credit card fraud, making it one of the most common types of fraud in the U.S.
  • Card-not-present fraud, which includes online, over-the-phone, and mail-order transactions, accounted for approximately $5.72 billion in losses in the U.S. in 2022, according to Insider Intelligence.
  • The Nilson Report forecasts that U.S. losses from card fraud will amount to $165.1 billion in this decade alone.
  • According to Insider Intelligence data, this year, card-not-present (CNP) fraud will account for $9.49 billion in loss, up 8.5% over last year. CNP will make up 73.0% of card payment fraud loss this year, up from 57.0% in 2019.


Who Picks Up the Tab? Are Retailers Liable for Credit Card Fraud?

Regarding credit card fraud, store owners must understand their liability in accepting online orders versus in-store purchases. In a card-present (CP) transaction, where the cardholder is physically present at the point of sale, the merchant can verify the card’s authenticity through identification checks and chip-enabled cards. If the merchant follows proper security procedures, they are not liable for fraudulent purchases, and the responsibility lies with the issuing bank.

However, in card-not-present (CNP) transactions, where the cardholder is not physically present, the liability shifts to the merchant. Without the ability to physically inspect the card or confirm its legitimacy, online merchants must bear the responsibility for any fraudulent orders and provide refunds to customers. This puts them at risk of financial loss, including the costs of refunding scammed customers and potential fees imposed by acquiring banks for chargebacks. Store owners must be aware of these distinctions and implement effective fraud prevention measures to protect themselves and their customers from the impacts of credit card fraud.

Combating Fraud in Retail: Effective Measures to Mitigate Chargebacks and Protect Payment Integrity

Retailers encounter various payment challenges, including fraud and chargebacks, due to their high transaction volumes and diverse customer base. Preventing fraud and reducing chargeback rates require specific measures.

While EMV chip technology has reduced card-present fraud in the retail industry, retailers remain susceptible to various fraudulent schemes and attacks. Account takeover attacks are prevalent, where fraudsters exploit customer accounts for unauthorized rewards or payment usage. First-party misuse, or “friendly fraud,” involves customers disputing legitimate purchases for false reasons. Delivery, curbside pickup, and BOPIS (buy online, pickup in–store) orders are particularly vulnerable to first-party misuse, as customers can make unfalsifiable claims. Retailers also face the risk of card-not-present fraud, such as “card testing” and subsequent chargebacks.

Fraud and chargebacks pose significant problems for retailers. Ignoring these risks can lead to escalating attacks, higher rates of fraud and chargebacks, and costly fees. Even a tiny fraudulent transaction can result in substantial revenue loss and fees. Additionally, card networks monitor fraud and chargeback rates, potentially resulting in fines, restrictions, or loss of merchant accounts. Thus, retailers must develop comprehensive strategies to combat fraud and minimize chargebacks.

Building a Strong Defense: Best Practices for Retailers to Counter Credit Card Fraud

Combatting credit card fraud in retail environments requires a layered approach incorporating multiple preventive measures. Retailers can adopt five best practices to prevent credit card fraud effectively. Firstly, implementing strong security measures such as AI-powered fraud filters and authentication protocols like 3-D Secure enhances the security of online credit card transactions. These measures help identify and prevent suspicious activities. Secondly, verifying customer identities through checking IDs or displaying confirmation screens for delivery, curbside pickup, and BOPIS orders ensures that orders are handed to the right individuals, reducing the risk of first-party misuse.

Additionally, educating and training employees on recognizing signs of potential fraud, including account takeover attempts, suspicious transactions, and fraudulent chargebacks, empowers them to take appropriate action and prevent fraudulent activities. Retailers should also retain transaction records, including receipts and delivery confirmations, as evidence to counter false claims made by cardholders during fraudulent chargebacks. Finally, staying informed and up-to-date on industry trends, fraud prevention techniques, security advancements, and card network guidelines helps retailers proactively address evolving fraud tactics, maintain compliance, and minimize vulnerabilities. By implementing these best practices, retailers can significantly reduce the occurrence of credit card fraud and protect their businesses.

How Credit Card Companies Support Merchants in the Fight Against Credit Card Fraud

Credit card companies such as Visa, MasterCard, and Amex are taking measures to protect merchants from credit card fraud. Visa uses Visa Advanced Authorization to detect and prevent fraudulent purchases. Mastercard also has a fraud detection system to protect merchants from fraudulent transactions. American Express uses fraud protection enhanced by machine learning to analyze numerous real-time risk variables. Merchants can reduce the expense of unauthorized credit card transactions using EMV-enabled card readers. Visa offers a variety of materials to support fraud prevention, security, and risk management efforts. Merchants can also take steps to limit the risks of credit card fraud, such as training staff about fraud, halting suspicious purchases, and using PCI-compliant payment systems.

Choosing the Right POS

Selecting the right Point of Sale (POS) system is critical in the battle against store credit card fraud. It’s like having a reliable security guard at the entrance of your business, ensuring that only legitimate transactions get through. A top-notch POS system comes equipped with advanced security features that shield customer data during payment processing, like encryption and tokenization. Plus, it should proudly display industry certifications, such as PCI DSS compliance, which means it has undergone rigorous testing to meet the highest security standards. By making an intelligent choice regarding your POS system, you’re fortifying your store’s defenses, safeguarding precious customer information, and keeping your business operations running smoothly and securely.

What role do machine learning and artificial intelligence play in credit card fraud detection?

There are several innovative technologies being used to prevent credit card fraud. Some recent innovations include universal credit cards, credit cards with push buttons, and finger/hand detection methods to protect from fraud. Major credit card networks use fraud protection enhanced by machine learning that analyzes numerous variables for risk in real time. Additionally, several proactive security measures can be taken to increase digital security, such as card security features like AVS, 3DS, and CVV that verify the cardholder’s identity.

Machine learning enables real-time insights and identifies fraudulent transactions in vast volumes of data1. Artificial neural networks trained using a simulated annealing algorithm effectively identify fraudulent credit card transactions. A machine learning-based credit card fraud detection engine has been proposed using the genetic algorithm for feature selection. Machine learning models are among the most prominent techniques in detecting illicit transactions. Autonomous credit card fraud detection using machine learning approaches has also been developed.


Credit card fraud is a pressing issue for retailers, with billions of dollars lost each year. The two types of fraud, card-present, and card-not-present, come with different liabilities for merchants and issuing banks. To combat this problem effectively, retailers must implement strong security measures, verify customer identities, educate their employees, retain transaction records, and stay updated on industry trends.

By using advanced tools like AI-powered fraud filters and authentication protocols, retailers can enhance the security of online transactions and identify suspicious activities. Implementing verification processes for delivery and pickup orders helps ensure that products reach the right customers and minimizes the risk of first-party misuse. Training employees to recognize signs of fraud and retaining transaction records as evidence are crucial for defending against fraudulent chargebacks. Additionally, staying informed about industry trends and adhering to card network guidelines are essential for compliance and minimizing vulnerabilities.

Credit card issuers also play a role in fraud prevention by employing machine learning and real-time risk analysis. Retailers can further protect themselves by using EMV-enabled card readers and PCI-compliant Point of Sale systems. Combining these measures with continuous monitoring and adaptation will help retailers stay ahead of evolving fraud tactics and safeguard their businesses. By taking proactive steps, retailers can reduce the financial losses and reputational damage associated with credit card fraud while ensuring the safety and trust of their customers.

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