CNP Expo: Prepaid Card Fraud and CNP
May 23, 2013
Nearly a third of U.S. citizens don’t have bank accounts and many of them use prepaid cards for payroll, to receive government payments and to shop online, said Lori Breitzke, president of E&S Consulting and moderator of a Thursday morning panel called “The Real Truth About Prepaid: Busting Prepaid Card Fraud Myths.”
Because the cards are not backed by credit, merchants sometimes are uneasy about accepting them. However, as the unbanked population grows and they turn to prepaid for electronic transactions, merchants who refuse these cards could lose sales and profits in the future.
The fraud potential inherent in prepaid, however, was illustrated recently by a $45 million heist of ATMs. Using reprogrammed prepaid cards from account information hacked from two card processors, thieves grabbed $8 million in cash from New York ATMs.
“Prepaid gets a stigma,” said David McCann, senior fraud consultant at WaveCrest. “They pick on prepaid as a scapegoat for a lot of things. The problem is the information security. It’s no different than a debit or credit card.”
There are 30 kinds of prepaid cards, from general purpose reloadable cards to cards on which users can load payroll or expense funds. Students often receive money from their parents on the cards. Gift cards are anonymous, but other cards contain customer information. Some companies now require the customers to identify themselves by registering if they use the card online.