The Struggle to Make the Checkout Lane Safer

[Audrey McNeil <audrey () riskbasedsecurity com>]

http://blog.credit.com/2014/09/stores-learning-to-spot-credit-card-fraud-96726/

Data breaches have the financial security spotlight right now, as they
should: In less than a year, more than 100 million consumer payment cards
have been compromised in massive attacks on companies like Target, Neiman
Marcus, Michaels, Sally Beauty Supply, P.F. Chang’s and, most recently,
Home Depot. If you haven’t felt the data breach fatigue by now, you’re an
exceptional consumer.

Cyberattacks like those mentioned above are cash cows for financial
criminals, and as long as merchants accept and store consumer payment
information, hackers will try to steal it. Not all fraudsters have the
skills necessary to execute such lucrative operations. It’s one thing to
steal data and sell it to others — it’s an entirely virtual process — but
it’s quite another to manufacture fake credit cards or steal people’s cards
and use them to make unauthorized transactions. Sometimes, people steal
credit cards rather than pay for things themselves (often, they don’t have
the means to do so). Other times, criminals are a bit more business-minded,
fraudulently buying valuable items and selling them for profit.

Physical, in-store credit card fraud is a completely different beast than a
data breach. While debacles like the Home Depot breach mostly come down to
technology, in-store fraud relies heavily on a much more fickle aspect of
security: people.

The Struggle Between Security & Customer Service

Anyone who has ever worked a cash register can attest to the fact that
there are rules about how to handle different transaction types and that
they are frequently broken. You’d be hard-pressed to find a cashier who
always checks an ID, compares signatures between receipts and credit cards
or does whatever else he or she is supposed to do in order to verify the
validity of the payment. Think about it: How many times have you swiped
your credit card, seen the screen display instructions like “Please hand
card to cashier” and never been asked by the employee to do so?

We hold instant gratification in high regard, so rather than appreciating a
worker’s effort to prevent credit card fraud, a customer would probably be
irritated if asked to produce their ID during a transaction. Jeffrey Sklar,
a financial forensics and financial crimes specialist, said pleasing the
customer often takes priority over all else.

“The cashier doesn’t really care: ‘If this is how you want to pay, pay — we
have 10 other people behind you, we have to move on,'” Sklar said,
describing a worker’s mentality when dealing with a possibly suspicious
transaction. “People will do things against company policies.”

There Are Few Good Options

Fraud-prevention practices vary by retailer, financial services networks
and payment processors: That’s why you sign credit card receipts at some
stores and not others, why some payment terminals are self-service and
others require you to hand over your form of payment, why some cashiers
have to enter a code after swiping your credit card.

Even with these measures, fraudsters can get around them, depending on the
amount of material they have to work with. If they have an ID (fake or
legitimate) that matches the card, that barrier goes down. If they have the
card’s security code imprinted on the back, that won’t be an obstacle,
either. Then there’s the fact that cashiers might not check for things
they’re supposed to. The personal aspect of sales allows a lot of room for
error.

“There will always be a human component: ‘I felt bad for them, so I let
them try that ninth credit card even though I’m not supposed to,'” Sklar
said, referring to instances that raise suspicion, like swiping multiple
cards that get rejected.

Even if the cashier tries to do the right thing, there’s no knowing how the
customer will react. Amid heightened concerns about identity theft, some
shoppers don’t want to show ID when asked for it while making credit card
purchases.

“They (retailers) can’t just reject the sale because you didn’t show
additional ID,” said Robert Moraca, vice president of loss prevention for
the National Retail Federation. “The retailer has to make a risks versus
benefits decision about whether or not to make the sale. … You’re giving
away a very possible legitimate sale, and you’ve alienated a customer.”

For the retailer, the risk is being held liable for fraudulent purchases.
On top of trying to balance security and customer service, merchants have
to account for the risk of employing inexperienced cashiers. Retail workers
are trained on fraud prevention, but the less experienced the employee, the
less likely they are to effectively prevent fraud, Moraca said. It’s a
chronic problem in an industry that relies on seasonal help.

It would be great if there were a proven, industry standard for preventing
fraud, Moraca said, but even if that were the case, there’s always the
human element to mess it up.

You Are Your Best Option for Stopping Fraud

Unsurprisingly, retailers weren’t eager to discuss their fraud-prevention
standards with the media — talking about such measures would help
fraudsters to work around them. We know retailers have their policies and
they of course want to train their employees to prevent credit and debit
card fraud, but the gap between the rules and reality isn’t much comfort to
consumers.

It’s not the kind of thing a credit card or debit card holder wants to
hear, but it’s on the consumer to protect their accounts from unauthorized
activity. Given retailers’ imperfect security measures, the best you can do
is watch your accounts for fraud. Check your card activity and bank
balances daily, and to catch someone opening accounts in your name, watch
your credit reports and credit scores for signs of suspicious activity. You
can see your credit reports for free every year through
AnnualCreditReport.com and you can see your credit scores for free using
tools on Credit.com.

Moraca has high hopes for fraud prevention when chip-and-pin technology is
widely implemented in the U.S. in 2015, but that’s still not a long-term
solution. Criminals will always try to find ways around security, because
the reward for beating it is great. Your most effective strategy for
protecting your financial interests is to counter human error with human
reasoning and attention to detail.

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