Much like the annual gains of any financial market, the cyber crime economy is growing.

According to the article, “Cyber crime hit 431 million adults in 24 countries,” a recent Norton cybercrime report found online crime jumped 3% compared to its 2010 study, costing fraud victims more than $388 billion worldwide over the past year.

Eating up 35% of the global cybercrime bill were U.S. fraud victims, who spent $139 billion on cybercrime last year. That amounts to 141 victims per minute, an alarming statistic even for Norton’s consumer cybercrime expert, Helen Malani. (more…)

Around 1994, when I operated a small mail order catalog business, it was very difficult to obtain “merchant status,” or approval to accept Visa, MasterCard, Discover, and American Express cards. It was easier if you had a storefront, but payment processors made mail order businesses jump through more hoops.

Their main concern was that companies could set up shop, accept tons of credit card charges, and then vanish, leaving the banks short. Mail order fraud was also big. A stolen credit card could be used to place orders over the phone, and when the fraudulent charges were discovered, merchants would suffer from chargebacks.

At the time, it wasn’t even necessary to provide a correct expiration date, as long as the card wasn’t already expired. Then credit card companies began verifying billing addresses to authenticate mail orders. Eventually, an additional verification code was added to cards, referred to as a CVC or CVV. We still use these codes today, but they can be fraudulently obtained in a number of ways. (more…)

It’s been described as the event that has the greatest potential for credit card fraud to ever occur in U.S. history. Fraud experts are saying that the recent Sony PlayStation Network data breach, in which hackers stole information on 77 million customers, could easily spill over to online retailers market if the cyber criminals got their hands on members’ credit card numbers.

In the Internet Retailer article, “Sony data breaches highlight the fraud risks online retailers face,” it was first disclosed that hackers made off with customers’ names, street addresses, email addresses and dates of birth. However, updated reports now say that up to 10 million credit cards may have been compromised. (more…)

As Internet advancements change the competitive landscapes of industries across the globe, fraud prevention mechanisms are essential to filter online payments and flag or stop suspicious transactions.

According to the article, “Securing Internet Payments,” 70% of all fraudulent credit card transactions originate from card-not-present (CNP) transactions. This has a substantial impact on the public’s confidence using their credit card for online transactions. Lacking the capability to prevent unauthorized transactions and associated fraud and abuse ultimately trickles down to Internet-based businesses’ bottom line revenues and profits. (more…)

A recent report seemed to imply that recent rises in Card Not Present (CNP) fraud in the UK was correlated with their efforts to mandate CHIP and PIN technology to fight face to face fraud.

Despite widespread adoption of the new technology and expected decreases in credit card fraud, there was instead a dramatic increase in fraud recently. Creditcardsweb.co.uk reports:

“Last year the value of credit card fraud in the UK came to a massive £610 million, which reflected a rise of 43 percent in the space of just two years.

Whilst CHIP and PIN technology was brought in to provide increased protection for consumers who were using their cards on the High Street, no such protection is in place when using a card to make online or telephone transactions, and this is why fraud in these areas has risen so sharply over recent years.” (more…)

Visa is launching a new card aimed at combating card not present (CNP) fraud in the UK. The card essentially adds a two factor authentication token to the back of the card that can be used to validate possession of the card online.

This is an interesting concept, but the execution of this with online businesses will make all the difference. The key here is the merchants and their adoption of this technology. If adoption is slow, then the card company may be forced to allow use of this card at sites without the pin. If this is the case, the improved authentication is rendered useless because a scammer could still steal the card information and use it online. If, on the other hand, the card issuer continues to require the use of the pin in order to complete an online transaction despite slow adoption by merchants, this could doom the use of the card by consumers as they won’t find enough places to use it.

Online merchants are the key to the success of this experiment and they have incentives to make this work. CNP fraud is a big problem and costs online companies billions of dollars per year. If they can band together to speed adoption of this technology, it will go a long way to changing how online fraud occurs.