Payment fraud prevention is an increasingly complicated and constantly evolving business. Issuers and merchants everywhere are being challenged by a growing variety of payment methods, which are fuelling the rise of ever more sophisticated card fraud techniques. Despite awareness of the scale of the problem, and the proliferation of innovative new technologies, the volume of fraudulent transactions is continuing to grow across Europe. To stem the tide, financial institutions need a new approach.
Changing the rules
Part of the problem is that regulations do not stop payment fraud; they simply encourage it to migrate between departments and regions – writes Sune Gabelgård, Head of Digital Fraud, Intelligence & Research at Nets. The case for payments regulation like PSD2 goes like this: the Strong Customer Authentication (SCA) requirements mandated are so stringent that they will stop fraudsters in their tracks.
Except…not quite. In reality, criminals will react to the EU legislation by changing their modus operandi. Fraudsters are very agile and used to adapting to new landscapes. For them this is not the end of the road, but merely a fork in it. In the long term, they will develop new, more advanced tactics that will enable them to resume targeting European consumers and merchants once more. In fact, as early as January 2018 we were seeing criminals preparing for and testing how they will commit fraud in a post-PSD2 world using shell companies and sophisticated social engineering.
continue reading »