How Credit Card Fraud Happens And The Golden Rules To Avoid It
Mar 28, 2021
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If you have a credit or debit card, there is a not inconsiderable chance that you are a victim of fraud, as millions of people around the world have been for years.Cards popularity
According to a 2016 report, in 2015 more than US $ 31 billion were generated worldwide through the card payment system, an amount 7.3% higher than in 2014.
Meanwhile, new online money transfer systems, such as Paypal, have contributed to the expansion of electronic commerce throughout the world, including developing countries.
The mechanism
Credit card fraud is made easier, in part, because transactions with this payment system are a simple, two-step process: authorization and settlement.
Initially, those involved in the transaction (the customer, the merchant and the banks that make and receive the transfer) send and receive information to authorize or reject a specific purchase.
If the purchase is authorized, it is settled by a money exchange, which usually takes place several days after authorization.
The golden rules
First of all, never click on links in emails that ask for personal information, even if the sender appears to be your own bank.
When making online payments, check that the website address begins with "https: //" which is a communication protocol for the secure transfer of data.
And finally, confirm that the website does not contain grammatical errors or strange words, as this suggests that it may be false, designed solely to steal financial data.
How to counteract fraud?
Based on my research, which examines how advanced statistical and probabilistic techniques could better detect fraud, I have concluded that sequential analysis and the use of new technologies are key factors.
By continuously monitoring the spending and information of the cardholder, including the time, amount and geographical coordinates of each purchase, it is possible to develop a computer model to calculate the probability of fraudulent use of the card.
If the probability passes a certain threshold, the card issuer would receive an alarm and the company could decide to block the card outright, initiate a further investigation, or call the consumer.
The strength of this model is that it aims to maximize a profit or minimize an expected cost.
In other words, all the calculations would be aimed at limiting the frequency of false alarms.
When making online payments, check that the website address begins with 'https: //' which constitutes a communication protocol for the secure transfer of data.
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