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Fraud and the Target Breach: Should You Believe the Hype?

As the torrent of media coverage around the Target data breach and others continues to unfold, I see similarities with another big news story: the Polar Vortex, freak snowstorms and bad weather in general.

The fact is, bad weather is constantly happening somewhere in the world. So is criminal activity perpetrated by fraudsters using personal data stolen in a multitude of ways. This includes attempting fraudulent transactions with stolen credit card numbers, as well as debit card and PIN data siphoned off in Target-style data breaches.

The media attention on bad weather and data breaches––or, more accurately, fear of their potential impact––is also unstoppable. That’s why, for those of us in fraud management, it’s so important to separate the hype from this important fact: not every data-breached consumer will become victim to payment card fraud.

Fraud detection technology: It works

The truth is that a large portion of fraudulent card transactions are detected early on—frequently even before losses accrue.

Why? The simple reason is that banks, card issuers and payment networks invest significantly to guard against fraud with many mechanisms, including artificial intelligence (AI) techniques like neural networks and behavioral profiling technologies (both used in our FICO® Falcon® Fraud Manager). And these safeguards really work.

As the Target data breach ballooned into the Neiman Marcus data breach and then the Michael’s data breach, I called my mom. As you may recall from my last post, she was rattled when the news of the Target data breach first broke over the holidays. I said, “So, Mom, did you know that:

  • “The software your son works on protects nearly two-thirds of all credit card transactions on earth––that’s 2.5 billion active payment card accounts.
  • “Since our software was first introduced in 1992, there has been a 70% reduction in overall credit card fraud losses in the US.
  • “Companies that use our solution experience a 50% reduction in fraud losses with the first 12 months.”

(Yes, I spoke in bullet points.) Mom sounded relieved, knowing that I was personally on the case.

Who’s leading the fraud fight?

Filial kidding aside, fraud detection technology is highly effective. Companies that continuously invest in it are in much better position to protect themselves and their customers from the next big data breach—as well as from other types of fraud attempts.

Several companies leading this fraud fight are highlighted in the 9th Annual Credit Card Issuers’ Identity Safety Scorecard, a report published by Javelin Strategy & Research. The report names Bank of America (BofA), USAA and Wells Fargo as the most secured credit card-issuing banks; while USAA won the award for Best in Prevention category, the Associated Bank and SunTrust topped the Best in Detection category.

We are honored that Falcon Fraud Manager plays an important role in helping the industry leaders battle fraud and is part of an industry that places so much focus on ensuring customer satisfaction.

Final advice for my mom

Of course, many people are still nervous about data breaches, and they should be. There are many steps that financial institutions and consumers can take to protect against credit card, debit card and identity fraud risks, and I support them all.

But one piece of advice that I haven’t seen getting as much press as it should, and which I recommended to my mom, is for consumers to check credit card and debit card transactions daily via online banking. If your institution offers spending alerts via email or text message, remind your customers to sign up for them. That way, they don’t have to wait for monthly statements to flag and report any suspicious transactions. They can do it immediately—and you can stop that fraud faster.

As for me, I’ll sign off now. I’m tuning in to the Weather Channel.

Thanks for all the shares of my previous post. Opinions, comments and shares are welcome below.  

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