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Card Skimming Essay

Credit Card Fraud is one of the biggest threats to business establishments today. Originally, credit cards simply carried raised numbers that were transferred to a carbon copy with a card-swiping machine. The merchant simply accepted any card presented. Spending limits and printed lists of lost/stolen cards were ineffective in preventing fraud and other financial losses. Merchants were required to telephone a transaction authorization center to get pre-approval of the transaction. The volume of telephone traffic grew too great, and more automated authorization systems allowed faster, easier, and verified transactions. Magnetic stripes on the backs of these payment cards started to appear and that allowed computers to be used at both ends of the call. The raised letters and numbers on the plastic cards are now rarely used or even read.

This then gave rise to “skimming” devices that could be used by some unscrupulous persons to electronically scan and save the information from many customers’ cards. Techniques such as “skimming,” in which criminals capture card information and personal-identification numbers, have existed for years, often on a small scale. A growing security concern with Skimming devices is the possible release of the user’s personal information or location to unauthorized parties. So, what is now needed is a way to increase the security of payment card use at merchant locations.

Problem Statement
Credit Card Fraud poses one of the greatest risks to businesses nowadays. As card business transactions increase, so too do frauds. According to the Jamaica Observer dated March 2010 “The National Commercial Bank (NCB) yesterday revealed that it lost more than J$100 million to credit card fraud last year, put merchants on guard against what it said was a rising problem”. Most cases of counterfeit fraud involve skimming. The fraudulent activity on a card affects everybody, i.e., the cardholder, the merchant, the acquirer as well as the issuer (bank). Several methods have been proposed in order to stop this. One such method adopted is a method of chips built into the card adding a layer of protection. The good news is that technology for preventing credit card frauds is improving with the passage of time.

Purpose Statement
This paper will describe the development of a system to provide real time detection of fraud attempt so as to increase the security payment of credit cards use at merchant POS locations. Research Questions

What is credit card fraud?
What is skimming?
How are cards skimmed and reproduced?
What are the implications of credit card fraud?
Can this type of fraud be prevented?
If so, how can this type of fraud be prevented?
About J$245.1 million has been lost to credit card fraud in Jamaica for 2009 (Jamaica Observer). In 2010 Europe, which has faced a bigger problem than the U.S.A saw card-skimming attacks jump 24% in the first six months to 5,743, the largest six-month number since data gathering began in 2004, according to the European ATM Security Team, a non-profit group. Consumers face trouble trying to get fraudulent charges reversed, merchants lose the cost of the products sold have to pay chargeback fees and fear from the risk of having their merchant account closed and loss of reputation. The issuers and acquirers also have to make huge investments in preventing frauds by deploying sophisticated IT systems for detection of fraudulent transactions. They also face financial and product losses, fines, loss of reputation and possibly loss of license if not compliant to credit card standards. This research study could provide information on how to help maintain the cost of fraud and losses due to fraud and help to put this at a manageable level. It will help acquirers and issuers to equip themselves with a counterattack to possible threats and that can help protect the user and the merchant from fraud. Definition of Terms

Credit Card Fraud is defined as when an individual uses another individuals’
credit card for personal reasons while the owner of the card and the card issuer are not aware of the fact that the card is being used. Card Skimming is a process where genuine data on a card’s magnetic stripe is electronically copied onto another.

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