The activity of credit card fraud criminals is creeping more and more into the realm of online shopping. While brick and mortar businesses have implemented strong fraud deterrents at the checkout line in recent years, online retailers are left more vulnerable.
Fraud and its associated costs, such as fraud prevention tools, takes a 7.5% cut out of merchant revenues on average. This cost is subsequently passed on to the consumer in the form of price increases.
Online fraud, also known as “card-not-present” fraud, is projected to finish off the year at around $4 billion after rising from $3.2 billion in 2015. By the year 2020, this number is expected to rise to over $7 billion!
While there isn’t any one-size-fits-all solution to this problem, there are some changes that the credit card industry is discussing. Among them are:
- Tokenization, or substituting a customer’s account number and expiration date with a unique number that validates one’s identity.
- Introduce new standards for card issuers to put technology in place that will accept additional sources of information to validate a purchase.
There is still a ways to go in the ongoing battle against fraud in the credit card industry. But steps have been made to lessen this threat, such as embedding chips in cards, which makes the creation of fraudulent replicas nearly impossible.