Hint: Crooks have figured out ways to circumvent the chip cards.

Answer (from WSJ): “Card-not-present” fraud.

So, what exactly is “card not present” fraud?

From Wall Street Journal:

“The rate of online card fraud is rising sharply as a growing number of purchases take place on the internet while brick-and-mortar merchants race to lock down vulnerabilities in the checkout line. That is prompting new steps to try to curb the threat: The credit-card industry on Tuesday announced a plan to encourage online merchants to provide card issuers with more detailed customer information that could be used to catch fraudulent purchases.”

Why is this type of fraud difficult to stop? From WSJ:

“In card-not-present transactions, “no one is standing there to authenticate you so it is the path of least resistance,” says Tom Byrnes,chief marketing officer at Vesta Corp., a company that helps online merchants tackle fraud. Vesta sponsored the Javelin study. Fraud is particularly difficult for online merchants because they are on the hook to pay the cost of bogus transactions, yet they also are under pressure to deliver products to customers quickly. That is especially the case for merchants that sell digital goods such as music or videogame downloads.”

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Check out this NGPF Lesson on Identity Theft

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.