Why credit card fraud alerts are on the rise | Wilnesh News

Most of us have been in this situation: You try to use your credit card to make a large or unexpected purchase, but when you need it most, the card is declined.

Sometimes, it’s as simple as confirming a purchase via text message and you can complete the transaction quickly. Other times, it’s a days-long process involving a confirmation code, mailing a letter, and waiting for the card company to confirm that you actually want to purchase the product.

Satish Lalchand, Deloitte’s U.S. risk and financial advisory leader, said the incidence of fraud alerts is “definitely” rising.

It cannot be ignored because many alerts are not false alarms.

According to Experian, by 2023, approximately 60% of credit card holders will have experienced some kind of attempted fraud.

“Fraud across all channels, whether it’s check fraud, fraudulent credit card payments, peer-to-peer payments, etc., is increasing significantly at a very rapid rate,” Lachand said.

Global bank card losses due to fraud will reach $33 billion in 2022, according to Payments Industry Research Nielsen Reportof which the U.S. market accounted for approximately 40% of the losses. According to projections, the ongoing threat of credit card fraud could reach nearly $400 billion over the decade to 2032.

Artificial intelligence is part of the problembut it is also part of the company’s solutions, including visa.

“What’s driving a lot of these frauds is the widespread use of artificial intelligence by the fraudsters themselves,” Larkand said. “So, they’re now able to move much faster.”

In the past, cybercriminals could open five to ten accounts per day. Now, thanks to advances in artificial intelligence, it has hundreds if not thousands of accounts.

But in the meantime, artificial intelligence is helping detect potentially problematic transactions, but the shortcoming in many cases turns out to be false positives.

“When we talk about credit cards, financial institutions are investing more in the concept of fraud and fraud modernization, replacing old technology and having better fraud detection capabilities, and recalibrating alerts,” Lachand said. “It’s also led to a huge increase in numbers in terms of testing.”

More personal data stolen

Michael Bruemmer, vice president and head of global data breach solutions and consumer protection at Experian, said there’s more than just stealing your credit card number, exploiting your financial background, your identity, other parts of social security. Fraud is committed through other means.

In the past five months alone, there have been four major data breaches, including Ticketmaster, Change Healthcare, AT&T and National Public Data. Experian said more breaches could lead to more scrutiny and more pre-emptive alert protocols, although they are generally not the main cause of alerts.

There is some good news. Overall, the rate of fraudulent credit card purchases is actually declining, According to Experian. In 2024, 416,582 cases of credit card fraud occurred.

Artificial intelligence’s ability to detect patterns based on previous behavior helps. While you may still get your credit card blocked for seemingly unusual purchases, technology has improved fraud alerts in other ways. Mastercard said that with the help of artificial intelligence, the ability to detect fraud has improved by 20% on average and the ability to detect fraud has increased by 300% without more false positives. Mastercard declined to provide statistics on the absolute level of fraud and the overall accuracy of fraud detection.

On Thursday, Mastercard announced Acquires payment fraud company Recorded Futurewhich has partnered with the company to help identify cards that have been compromised.

“We’ve come a long way to really reduce friction,” said Johan Gerber, executive vice president and head of security solutions at Mastercard.

Take travel planning and shopping abroad for example. Previously, people had to call their credit card company. Credit card companies now automatically record vacation and travel patterns based on past purchases. Technology is also making it faster to identify and clear flagged fraud alerts (if they are indeed false positives). In many cases, verification can be completed in minutes by authorizing the associated account or using information known only to the cardholder personally, without having to call and wait.

Tips to reduce unnecessary alerts

Today, certain situations raise concerns within current safety parameters. Experian pointed out that while a data breach may raise fraud alerts, changes in shopping patterns will certainly raise red flags. You’ll usually notice this if you’re shopping at a new store or buying a big-ticket item you wouldn’t normally buy. Mastercard also said that attempting multiple transactions in quick succession will always alert their systems. So you can expect these to generally get some kind of temporary blocking.

“It’s a balance,” Gerber said. “Do I want to inconvenience myself? Do you want to do a transaction where (MasterCard) might make an error because (we) deny you? Or do I want to sit back and lose track of what (we) actually did? The other side of trust?

Other things you can do to ensure you get the most accurate fraud alerts is to sign up for a monitoring service and set limit alerts for your account yourself. Most institutions will let you set a funding limit on when you will be notified of large transactions. It may also be beneficial to freeze your credit files, use a password manager, and use biometric passwords for two-step verification of your financial accounts.

“Try to shop at legitimate, reputable shopping sites, and if you’re going to use a credit card, have a low-level credit card that’s only used on those shopping sites,” says Blumer. “I also recommend using tap and pay or a mobile app and then making sure you’re not shopping on a public Wi-Fi network.”

And, even though alerts may be annoying, don’t ignore them. Even though you may receive notifications of data breaches on a seemingly daily basis, that doesn’t mean you won’t eventually be affected.

“Consumers should be concerned about all of this because it’s only a matter of time… that they will be affected,” Lachlan said.