A PROJECT REPORT

ON _____201319000619________________________________________________ _______________________________________________________________ ______________________________________________________

in the subject Economics of Global Trade & Finance

SUBMITTED TO UNIVERSITY OF MUMBAI FOR SEMESTER I OF M.COM.

BY Name of the student (________________________________) (Roll No. __________) UNDER THE GUIDANCE OF Prof. / Dr. __________________ YEAR 2012 2013

A PROJECT REPORT

ON ______________________________________________________________ _______________________________________________________________ _____________________________________________

in the subject Economics of Global Trade & Finance

SUBMITTED TO UNIVERSITY OF MUMBAI FOR SEMESTER I OF M.COM.

BY Name of the student (________________________________) (Roll No. __________) UNDER THE GUIDANCE OF Prof. / Dr. __________________ YEAR 2012 2013

CERTIFICATE
This is to certify that the project entitled ______________________________ ______________________________________________________________ ______________________________________________________________ ___ submitted Mr./Ms._______________________________________________ by Roll

No. ________ student of M.Com. (Part-I) Accountancy / Management / Banking & Finance (University of Mumbai) Semester I examination has not been submitted for any other examination and does not form a part of any other course undergone by the candidate. It is further certified that he / she has completed all required phases of the project. This project is original to the best of our knowledge and has been accepted for Internal Assessment.

Internal Examiner

External Examiner

Co-ordinator College Seal

3

Principal

DECLARATION BY THE STUDENT

I, Chitra Salianstudent of M.Com. Part-I Banking & Finance, Roll No. 235 hereby declare that the project for the Paper commercial banking titled, A Study On Frauds in Plastic money submitted by me to University of Mumbai, Semester I examination during the academic year 2012-2013, is based on actual work carried by me under the guidance and supervision of Prof. Neha Gaikwad . I further state that this work is original and not submitted anywhere else for any examination (Signature of student)

ACKNOWLEDGEMENT
At the beginning, I would like to thank GOD for his shower of blessing. The desire of completing this project was given by my guide Prof. Neha Gaikwad . I am very much thankful to her / him for the guidance, support and for sparing her / his precious time from a busy schedule.

I would fail in my duty if I dont thank my parents who are pillars of my life. Finally I would express my gratitude to all those who directly and indirectly helped me in completing this project.

(Signature of the student)

EXECUTIVE SUMMMARY

Man has progressed from barter system to paper currencies and now to plastic money. Plastic money offer you the convenience, safety , more purchasing power and host of fringe benefits .most card offer benefits like discount coupon and invitation to exclusive events. But it is not with out its faults. Not only do we tend to spend recklessly at times but also lands ourselves in trouble by going over the credit limits and not being able to pay back in time. However this is something which we can ourselves control. There is an even larger but unnoticeable threat to the sanctity of our plastic money There are a whole lot of fraudulent hackers and other criminals out there to take advantage and misuse our plastic cards for their own benefits. A little caution from our end ensures that the cards are not misused Consumers should also be educated on proper usage of the cards and measures they should undertake in ensuring the safety and protection of plastic cards . In India ,the growth of plastic money has been explosive. With the recent announcement by various credit card companies to offer free credit card , there will be boon a boom in the market .more plastic money in the market means more is the opportunities for the criminal to misuse them. Plastic money if used prudently and judiciously will be a boon for the consumers. The requirement here is that the cards do not fall into wrong hands and expose ourselves to its dangerous consequences.

A PROJECT REPORT

ON ______________________________________________________________ _______________________________________________________________ _____________________________________________

in the subject Economics of Global Trade & Finance

SUBMITTED TO UNIVERSITY OF MUMBAI FOR SEMESTER I OF M.COM.

BY Name of the student (________________________________) (Roll No. __________)

UNDER THE GUIDANCE OF Prof. / Dr. __________________ YEAR 2012 2013

7

A PROJECT REPORT

ON ______________________________________________________________ _______________________________________________________________ _____________________________________________

in the subject Economics of Global Trade & Finance

SUBMITTED TO UNIVERSITY OF MUMBAI FOR SEMESTER I OF M.COM.

BY Name of the student (________________________________) (Roll No. __________) UNDER THE GUIDANCE OF Prof. / Dr. __________________ YEAR 2012 2013

CERTIFICATE

This

is

to

certify

that

the

project

entitled

______________________________ ____________________________________________________________ ____________________________________________________________ _______ submitted Mr./Ms._______________________________________________ by Roll

No. ________ student of M.Com. (Part-I) Accountancy / Management / Banking & Finance (University of Mumbai) Semester I examination has not been submitted for any other examination and does not form a part of any other course undergone by the candidate. It is further certified that he / she has completed all required phases of the project. This project is original to the best of our knowledge and has been accepted for Internal Assessment.

Internal Examiner

External Examiner

10

Co-ordinator

Principal

College seal

11

DECLARATION BY THE STUDENT

I, Chitra Salianstudent of M.Com. Part-I Banking & Finance, Roll No. 235 hereby declare that the project for the Paper commercial banking titled, A Study On Frauds in Plastic money submitted by me to University of Mumbai, Semester I examination during the academic year 2012-2013, is based on actual work carried by me under the guidance and supervision of Prof. Neha Gaikwad . I further state that this work is original and not submitted anywhere else for any examination (Signature of student)

12

ACKNOWLEDGEMENT
At the beginning, I would like to thank GOD for his shower of blessing. The desire of completing this project was given by my guide Prof. Neha Gaikwad . I am very much thankful to her / him for the guidance, support and for sparing her / his precious time from a busy schedule.

I would fail in my duty if I dont thank my parents who are pillars of my life. Finally I would express my gratitude to all those who directly and indirectly helped me in completing this project.

(Signature of the student)

13

EXECUTIVE SUMMMARY

Man has progressed from barter system to paper currencies and now to plastic money. Plastic money offer you the convenience, safety , more purchasing power and host of fringe benefits .most card offer benefits like discount coupon and invitation to exclusive events. But it is not with out its faults. Not only do we tend to spend recklessly at times but also lands ourselves in trouble by going over the credit limits and not being able to pay back in time. However this is something which we can ourselves control. There is an even larger but unnoticeable threat to the sanctity of our plastic money There are a whole lot of fraudulent hackers and other criminals out there to take advantage and misuse our plastic cards for their own benefits. A little caution from our end ensures that the cards are not misused Consumers should also be educated on proper usage of the cards and measures they should undertake in ensuring the safety and protection of plastic cards . In India ,the growth of plastic money has been explosive. With the recent announcement by various credit card companies to offer free credit card , there will be boon a boom in the market .more plastic money in the market means more is the opportunities for the criminal to misuse them. Plastic money if used prudently and judiciously will be a boon for the consumers. The requirement here is that the cards do not fall into wrong hands and expose ourselves to its dangerous consequences.

14

Chapter No. 1.

TOPICS INTRODUCTION PLASTIC MONEY CREDIT CARD TO

PAGE NO 9

2.

13

3.

PROCESS CARD

OF

DEBIT 27

4.

INTRODUCTION PLASTIC FRAUD

TO 28

5.

TYPES FRAUDS

OF

PLASTIC 29

6.

PREVENTION AGAINST 38 PLASTIC FRAUDS FRAUD AND 47 PREVENTION MANAGEMENT FRAUD PREVENTION 48 AND TECHNOLOGY RECENT DEVELOPMENT 51 IN FRAUD MANAGEMENT RBI GUIDELINE ON 56 PLASTIC FRAUDS SCAMS ANALYSIS REPORT OF 58 SURVEY 59

7.

8. 9. 10. 11. 12.

13.

CONCLUSION

66

15

14.

WEBLIOGRAPHY AND BIBLIOGRAPHY

67

16

Design of Study

The main objective to choose this topic This is very practical and interesting topic This topic gives knowledge on different types of plastic fraud and prevention on the same Also topic gives knowledge on different types of cards and their usage and drawback

Scope of Study The Indian scenario has been presented The benefits and drawback from cardholders perspective has been stated The primary research that is the survey conducted has been concentrated only to banks.

17

METHODOLOGY

The information provided in this project has been collected from various books on plastic fraud Content has been Analyzed through data collection by observing the content of magazines, newspapers, either articles, programs, or advertisements etc Websites were visited to get the knowledge on the topic Various banks were visited to get knowledge on the topics

18

INTRODUCTION

Plastic money or polymer money made out of plastic is a new way and easier way of paying for goods and services. Plastic money was introduced in 1950s and is now an essential form of ready money which reduces the risk of handling a huge amount of cash. It includes debit card ,ATMS ,smart card etc. credit card card variant of plastic money ,are used as a substitute for currency .

Meaning Plastic money refers to credit card , you use them whenever you want and pay later (with interest of course). It makes to easy for people to buy things they normally could not afford, which make it easier to get into debt. Definition A slag phrase for credit card , especially when such cards used to make purchases. The plastic portion of this term refers to the plastic construction of credit cards, as opposed to paper and metal of currency. The money portion is an erroneous reference to credit card as a form of money , which they are not. Although credit card do facilitate transaction ,because they are not a liability rather than an asset, they are not money and not part of the economys money supply.

19

TYPES OF PLASTIC MONEY Different types: Credit card A credit card is plastic money that is used to pay for products and services at over 20 Million locations around the world. All you need to do is produce the card and sign a charge slip to pay for your purchases. The institution which issues the card makes the payment to the outlet on your behalf; you will pay this 'loan' back to the institution at a later date. a safe alternative to cash and checks Debit card Debit cards are substitutes for cash or check payments, much the same way that credit cards are. However, banks only issue them to you if you hold an account with them. When a debit card is used to make a payment, the total amount charged is instantly reduced from your bank balance. Don't borrow on your credit card! Here's why A debit card is only accepted at outlets with electronic swipe-machines that can check and deduct amounts from your bank balance online.

20

Amex card Amex stands for American Express and is one of the well-known charge cards. This card has its own merchant establishment tie-ups and does not depend on the network of MasterCard or Visa. Credit cards: Remember these dos and don'ts. . Global card Global cards allow you the flexibility and convenience of using a credit card rather than cash or travelers cheque while traveling abroad for either business or personal reasons

Co-branded card

Co-branded cards are credit cards issued by card companies that have tied up with a popular brand for the purpose of offering certain exclusive benefits to the consumer. A debit card with a difference For example, the Citi-Times card gives you all the benefits of a Citibank credit card along with a special discount on Times Music cassettes, free entry to Times Music events, etc.

21

 Master card & Visa MasterCard and Visa are global non-profit organizations dedicated to promote the growth of the card business across the world. They have built a vast network of merchant establishments so that customers worldwide may use their respective credit cards to make various purchases Smart card

A smart card contains an electronic chip which is used to store cash. This is most useful when you have to pay for small purchases, for example bus fares and coffee. No identification, signature or payment authorization is required for using this card. The exact amount of purchase is deducted from the smart card during payment and is collected by smart card reading machines. No change is given. Currently this product is available only in very developed countries like the United States and is being used only sporadically in India. Photo card

If your photograph is imprinted on a card, then you have what is known as a photo card. Doing this helps identify the user of the credit card and is therefore considered safer. Besides, in many cases, your photo card can function as your identity card as well.

22

CREDIT CARD INTRODUCTION A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services. The issuer of the card grants a line of credit to the consumer or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user. Usage of the term "credit card" to imply a credit card account is a metonym. When a purchase is made the user would indicate consent to pay by signing a receipt with a record of the card details and indicating the amount to be paid. Issuer agrees to pay the merchant and the credit card user agrees to pay the card issuer.

Definition The credit card can be defined as A small plastic card that allows its holder to buy goods and services on credit and to pay at fixed intervals through the card issuing agency. MEANING:A credit card is a card or mechanism which enables card holder to purchase goods, travels and dine in a hotel without making immediate payments. The holders can use the cards to get credit from banks up to 45 days.

23

The credit card relieves the consumers from the botheration of carrying cash and ensures safety. It is a convenience of extended credit without formality. Thus credit card is a passport to, safety, convenience, prestige and credit. ADVANTAGES & DISADVANTAGES OF CREDIT CARD ADVANTAGES OF CREDIT CARD The benefits of credit card can be grouped as follows: (A) BENEFITS TO THE BANK a) A credit card is an integral part of banks major services these days. The credit card provides the following advantages to the bank: the system

provides an opportunity to the bank to attract new potential costumers. b) To get new customers the bank has to employee special trained staff. This gives the bank an opportunity to find the latent talent from among existing staff that would have been otherwise wasted. c) The more important function of a credit card, however, is simply to yield direct profit for the bank. There is a scope and a potential for a better profitability out of income / commission earned from the traders turn over. d) This also provides additional customer services to the existing clients. It enhances the customer satisfaction. g) Savings of expense on cash holdings, i.e. stationery, printing and man power to handle clearing transactions while considerably is reduced. It increases

24

(B) BENEFITS TO CARD HOLDER The principal benefits to a card holder are: a) He can purchase goods and services at a large number of outlets without cash or cheque. The card is useful in emergency, and can save embarrassment. b) The risk factor of carrying and storing cash is avoided. It is convenient for him to carry credit card and he has trouble free travel and may purchase his without carrying cash or cheque. c) Months purchases can be settled with a single remittance, thus, tending to reduce bank and handling charges. d) The card holder has the period of free credit usually between 30-50 days of purchase e) Cash can usually be obtained with the card, either on card account or by using it as identification when encasings a cheque at the bank. f) Availing credit with minimum formality

25

(B) BENEFITS TO CARD HOLDER The principal benefits to a card holder are: a) He can purchase goods and services at a large number of outlets without cash or cheque. The card is useful in emergency, and can save embarrassment. b) The risk factor of carrying and storing cash is avoided. It is convenient for him to carry credit card and he has trouble free travel and may purchase his without carrying cash or cheque. c) Months purchases can be settled with a single remittance, thus, tending to reduce bank and handling charges. d) The card holder has the period of free credit usually between 30-50 days of purchase e) Cash can usually be obtained with the card, either on card account or by using it as identification when encasings a cheque at the bank. f) Availing credit with minimum formality.

26

C) BENEFITS TO THE MERCHANT ESTABLISHMENT The principal benefits offer credit card to the retailer is a) This will carry prestigious weight to the outlets. b) Increases in sale because of increased purchasing power of the cardholder due to unbilled credit available to the card holder. c) The retailers gain from the impulse buying and trading up the tendency to buy the bigger or better article d) Credit card ensures timely and certainly of payments. e) Suppliers/sellers no longer have to send reminders of outstanding debits. f) Systematic accounting since sales receipts are routed through banking channels. g) Advertising and promotional support on national scale. h) Development of prestigious clientele g) The credit card saves trouble and paper work to traveling business man.

27

Low Interest Credit Cards These types of credit cards offer very low interest. In some cases, these cards just charge a few percent interests. The reasons for this are numerous. In most cases, the low interest rate is for a limited time only. After a set number of months, you will begin paying higher interest rates. In some cases, low interest credit cards are not really credit cards at all - they are debit cards linked to a low-interest loan such as a line of credit. Check your agreement to find out what type of card you have. If you need to consolidate debts or if you like the idea of having low interest for a while, this type of credit card can be perfect for you. Instant Approval Credit Cards These cards are really a product of our fast-paced society. The idea behind this type of credit card is that once you fill out your application, you will be told whether you are approved or not right away. The approval process only takes a few minutes. Instant approval credit cards are very popular online and applicants . If you are very impatient or need credit right away, these

types of cards can be for you. However, you should be aware that these cards do not guarantee that you will be approved right away - sometimes, more time is needed to process your application. Another drawback to these cards is that they rely heavily on your credit score. If you have poor credit or any extenuating financial circumstances, these types of cards may not be for you.

28

Balance Transfer Cards Balance transfer cards are a type of temporary low-interest card that is meant to help you consolidate your debt. They work this way: if you have several credit cards with a balance, you can get a balance transfer card. You then transfer all your credit card debt onto the new card and work to pay it off. Since the new card has a low interest rate, you can quickly repay your bills. card can be a great way to get out of debt. It offers the convenience of one bill and low rates. However, some cards have high fees. Also, if you run up your other cards after consolidating your debts or if you are unable to pay off your new card in the limited time before the low interest rate increases, you may find yourself even more in debt than before.

Rewards Credit Cards Rewards credit cards offer you points, rewards, or bonuses for every cash purchase made with your credit card over time. As you accumulate rewards or points, you can redeem your bonus for entertainment events, purchases, travel, and other fun prizes. Some cards even offer customers extra automatic-enter sweepstakes and draws. Each time you use your card, you are entered into a draw to win specific prize .These types of cards are really a marketing tool for card companies. Companies know that customers love rewards and prizes and so offer these enticements to lure customers. The major advantage of these cards is that they can help you get more cash
29

value for your money. They can also be fun and rewarding for almost any credit card customer. However, not all reward credit cards are a deal. Some charge high fees to offset the costs of the bonuses. Some also have very low points systems, meaning that you need to spend a lot with your credit card to get any rewards at all. Cash back credit card Cash back credit cards give you money rewards. When you make a purchase with this type of credit card, you get some points based on the amount of money you have spent with your credit card. When you accumulate enough points, you get cash back. On most cards, you can get back about 1% of your total purchases. These cards are great for those who are budget-conscious as they give you some money back from your purchases. However, there are several drawbacks to these types of cards. Some cards have low cash-back percentage rates. Some charge high fees or have limits on how much money you can get back each year. Most cards only offer you cash back advantages on purchases - not on your balance. If you decide this card is right for you, do compare several card offers to find the best cash back credit card option.

Airline Credit Cards This type of card allows you to accumulate frequent flyer points on all your credit card purchases. If you travel a lot or love to travel, this card can help you accumulate points for a free trip or for a discount ticket. In many cases, these cards are great because they allow you to gather points for every
30

purchase. However, these cards can also charge high fees. In some cases, your points will expire if you do not use them within a specified time. Worse, some airline credit cards make use of a point system that is not very user-friendly. You may have to slowly accumulate an enormous amount of points to qualify for a trip. If you do not love to travel and if you do not use your Credit card a lot, then, your ability to get rewards you like may be very limited.

Prepaid Credit Card These cards are sometimes called junior credit cards. They are not truly credit cards at all, since you are not getting credit or loans from the credit card company. Instead, these cards work by having you deposit some money into the card account. You can then use your card to charge any amount up to the amount in the account. When you add more money, you can charge more to your card.0000000000000000000000000000000000

Secured Credit Cards Secured credit cards use collateral to ensure that the card company will be paid back. Often, these cards are used by people with no credit or bad credit. With secured credit cards, you can enjoy credit card convenience even if you do not qualify for traditional cards. However, you will also have to cope with the a

31

Credit Cards for Bad Credit Bad credit credit cards are designed for people with poor credit histories. These cards generally have very low credit limits and charge extra fees. This is because they are designed for people who are considered far less likely to repay their debts. If you have a bad credit rating, these types of credit cards can be a great way to rebuild your credit history. These cards can also allow you to have credit even if you would be rejected for most other cards due to your credit history. Student Credit Cards Student credit cards are cards meant to attract college and university students. These cards often offer sign-up bonuses for students. They are also easier to apply for, If you are a student, student credit cards can be a great option. They are simple to use and can help you build a good credit rating before you graduate. However, there are some disadvantages to student credit cards. These cards may have no reward programs and may have fewer benefits, including fewer bonuses and services, than other cards.

Business Credit Cards Business credit cards are created especially for business use. They offer many of the same advantages as traditional credit cards, but also offer services that can really help a business. With some business credit cards, for example, you can enjoy higher interest rates, extra cards for business employees, monthly reports on your expenses, and services that let you keep

32

your personal and business expenses separate on the same card. additional fees and low credit limits that these credit cards have. Types of Credit Cards offered by Indian Banks Silver Cards Silver credit cards rank lowest among the metal named cards, and, because of lower prestige when compared to gold and platinum cards, are commonly known as basic and standard credit cards. Silver credit cards come with advantages such as lower annual membership fees if there is any, and a lower threshold salary which banks use to evaluate your application in case you should apply. Silver credit cards will provide you with almost the same credit limit as other cards provided you have a good credit history. You can also avail of 0% interest balance transfer schemes which are made available for a period of 6-9 months for silver card holders. There are also some disadvantages to using silver credit cards. One would be the lower cash advance limits, less rewards and promotional packages, and less travel perks compared to gold and platinum cards. HDFC Bank, ICICI offer silver credit cards through their HDFC Bank Silver cards and ICICI Sterling Silver credit card

33

Gold and Platinum Cards Gold and platinum credit cards are a status symbol for any credit card holder, bringing prestige since getting gold and platinum cards usually require that you have good credit rating and a higher income levels. Gold and platinum cards offer higher limit for cash advance withdrawals and sometimes can provide higher credit limits as compared to standard or silver cards. If you have a gold or platinum card, you also get better perks and privileges such as travel insurance, extended warranties for appliance purchases and special deals on specific products, and purchase protection insurance. You can also engage in some loyalty schemes that are offered for gold and platinum credit card holders which can sometimes involve cash back promos and reward points systems. Some popular gold and platinum cards available are the American Express Gold card, and the ICICI Solid Gold Credit Card.

34

 Credit Card Data Credit Card is either Visa or MasterCard which is the Most popular and in some instance American express. The Top 10 Credit Card Issuers in India are as follows, ICICI BANK HDFC BANK SBI BANK Citi BANK HSBC BANK A BN BANK XIS BANK DEUTSCHE BANK AMERICAN EXPRESS BENEFITS OF DEBIT CARDSBENEFITS OF THE DEBIT CARD FREE WITH OUR BANK ACCOUNT Obtaining a debit card is easy. If we qualify to open a bank account, we usually get a debit card, if our bank offers the service.

35

 NO BACKGROUND CHECK When we are applying for a debit card, the ban does not need to look into our credit history. All we need is the documentation to open a bank, account, and money in our bank when we use our debit card. CASH WITHDRAWALS The customer can withdraw a minimum of Rs. 100/- and a maximum Rs.10, 000/- per day CONVENIENCE A Debit card fees us from carrying a lot of cash or a cheque book. In case, we are an international traveler, we dont need to stock up on Travelers Cheques or cash. We can use our debit card to withdraw Cash from over 500,000 ATMs around the world in over 100 countries. We can withdraw in the local currency of the country we are in, limited only by the money we have back home in our account, and Business Travel Quota (BTQ) limit arability. FAIR EXCHANGE If we return merchandise or cancel services paid for with a Debit

card, the transaction is treated as if it were made with cash or a check. Customers usually get cash back for offline purchases; for on-line transactions, the amount is credited to our account. STATEMENT OF ACCOUNT A statement of transactions can be obtained from the customers branch. For example, a mini statement containing the last four transactions and balance can be obtained at a State Bank Group during the working hours of the customers branch.
36

BANKING CUM SHPPING CARD Your Debit card can be used as ATM card at any ATM across the world, as well as for making purchase at merchant locations. You can also withdraw cash from any of the 12000 ATMs in India. Process Debit Card Transactions A successful business will usually accept debit cards as a part of their overall profile of payment solutions. If you dont process debit cards, you may not be taking full advantage of all the potential that your merchant account can deliver. There are essentially two ways you can accept debit cards, online and offline. Off line debit card transactions An offline debit card transaction is still the way most merchants accept debit cards. This is essentially the same as processing credit cards. You swipe your customers debit card through a credit card terminal and have them sign the receipt. If you choose to accept debit cards offline, be sure that the debit card has a VISA or MasterCard logo. Otherwise, the debit card wont be approved and you wont be able to process the debit card offline

37

Online debit card transactions An online debit card transaction works much like a credit card transaction, except that after your customer swipes his or her debit card, they will enter a PIN instead of signing the receipt.

INTRODUCTION TO PLASTIC FRAUD

State-of-the-art thieves are concentrating on plastic cards. In the past, this type of fraud was not very common. Today, it is a big business for criminals. Plastic cards bring new convenience to your shopping and banking, but they can turn into nightmares in the wrong hands. This describes credit and debit cards and some common schemes involving card fraud with tips to help you avoid them 1. Credit card fraud 2. Debit card fraud 3. The Stolen Cards at the 4. Extra Copies of Charge Slips 5. Discarded Charge Slips 6. Unsigned Credit Cards 7. Loss of Multiple Cards 8. Strange Requests for Your PIN Numbers
38

9. Legitimate Cards 10. Altered Cards 11. Internet fraud

The following are the types of frauds CREDIT AND DEBIT CARD Although they may look the same, all plastic cards do not work the same. In fact, there are two very different kinds of cards in use today: credit cards and debit cards. As the names imply, credit cards allow the extension of credit and the delay of payment while debit cards charge or debit your account at the moment of the transaction. Credit Cards Many credit cards work as follows: You charge goods or services and the merchant who accepts your credit card sends the transaction information to the card-issuing institution. The institution then bills you, usually on a monthly basis. In many cases, payment may be made by the due date with no interest assessed. If the total bill is not paid by the due date, you often can pay off your debt in monthly payments that include finance charges.

39

Types of credit fraud Intercept fraud Postal intercept fraud occurs when a card is stolen from the postal service before it reaches its intercept fraud has become a less. Firstly this is due to successful tracking of individuals who work for the postal service that steal these cards, secondly this is due to various safeguards employed by the card issuers. Postal intercept fraud has declined mainly due to these factors, but also because there are easier ways for individuals to commit credit card fraud.

Application fraud Application fraud can be split into two categories. The first of these is where a criminal assumes another persons identity, solely for the purpose of receiving another individuals credit cards. The second form of application fraud is known as financial fraud. This is where an individual applies for a credit card, but gives false details about his or her self. Fake and doctored card The creation of fake and doctored cards represents the last of the major traditional forms of credit card fraud. Whether it be creating a completely fake card from scratch, or altering an existing card to show different details, the fraudsters are constantly finding new and more innovative ways to create fake or doctored cards.

40

 Skimming According to Ian Lindsey, former Treasurer of the Chartered Institute of Bankers, ' reverse of the card is copied on to the stripe of another card' (Lindsey, 1994) Skimming is fast becoming the most popular form of credit card fraud. When skimming was first adopted by criminals to commit credit card fraud it was primarily an operation that took place in retail outlets or restaurants False merchant site The site requests a customers full credit card details, name and address in return for access to the content of the site. Most of these sites claim to be free, but require a valid credit card number to verify an individuals age. These sites are set up to accumulate as many credit card numbers as possible. The sites themselves never charge individuals for the services they provide. The sites are usually part of a larger criminal network that either uses the details it collects to raise revenues, or sells valid credit card details to smaller fraudsters. Debit Cards Debit cards, unlike credit cards, automatically withdraw funds from your account at the time you make a transaction. Debit cards are used most commonly at automated teller machines (ATMs) and for purchasing goods directly in stores. The machine-readable plastic card contains a magnetic strip indicating your account number, bank number, and type of account. Debit card users gain access to the issuing institution's computer by using a secret code, their personal identification number (PIN). The PIN should only be known to the card holder.

41

TYPES OF DEBIT CARD FRAUDS PHYSICAL THEFT Debit card fraud is when someone steals the debit card itself, either by stealing a wallet, not reporting a lost card they find or removing a card from an unattended purse, briefcase or ATM. One of the built-in safeguards against debit card fraud is the PIN (personal identification number) code, which cardholders must use to gain access to an account. However, once a thief has the debit card, his chances of committing fraud increase dramatically, particularly if he is able to steal other information from the victim that may include the PIN code. Another form of debit card fraud is theft of the cardholder's PIN and card number. This can occur in several different ways. Thieves can use cameras, or their own eyes,

PIN AND CARD NUMBER THEFT To watch users enter a PIN at an ATM or store checkout counter. They can also commit debit card fraud by "skimming," which involves using equipment to capture the magnetic tape, keypad information, or internal memory of an ATM, gas pump or other payment device. Also, fraudulent employees at points of sale can make a second copy of the payment receipt if you are signing for the bill and can then use your personal details to make online transactions

42

 IDENTITY THEFT Identity theft can include an extreme form of debit card theft, when the thief attempts to impersonate the cardholder using personal information she has managed to obtain, such as a birth date or social security number. With this information the thief may be allowed to get the debit card number and withdraw cash from the cardholder's account or purchase merchandise which can then be sold for cash or kept. HACKING A much more dangerous, large-scale form of debit card fraud occurs when someone gains access to a bank's files, often by hacking into the bank's computer system remotely or stealing a bank computer. This gives thieves access to hundreds, or even thousands, of PINs, along with other confidential personal information. On an individual level, hackers may gain access to personal computer information using spyware. FALSE CARDS A different kind of debit card fraud involves the creation of false debit cards based on information taken from payment points. In some cases criminals preprogram the payment machines to capture all of the debit card details. The false cards may have fraudulent account numbers and authentic-looking bank logos. These cards sometimes function without a PIN and may be linked to a bank customer's actual checking account. Although credit and debit card fraud can take many forms, the following examples explain some situations to watch for. Stolen Cards at the Office Over the lunch hour when you leave your office for lunch, you could be the target of a credit card thief. Credit card thieves often gain illegal access to the offices of employees who are away in order to search unattended. Most times, they leave the offices and immediately go on a shopping spree, charge credit cards to their limits, and withdraw cash on debit cards.

43

 Extra Copies of Charge Slips When processing your credit card, a dishonest merchant may decide to imprint a few extra copies of the charge slip. Later, the merchant can submit these copies to the issuing institution for payment on phone charges.

Discarded Charge Slips Sometimes, people may collect copies of your discarded charge slips from the wastebasket. Dishonest people could use the information from the copies to order merchandise by mail and ship it to a phony address. In addition, they could also sell the copies to counterfeiters who would take the account numbers and use them to alter cards or make new ones. Unsigned Credit Cards Stealing and using credit cards that have not been signed is another potential fraud . In other words, credit card thieves could steal your unsigned credit cards and then sign your name on the card in their handwriting. By doing so, they take your name as an alias and they will never have a problem writing and verifying their own signature.

Loss of Multiple Cards While shopping, you can easily be targeted by pickpockets. Strange Requests for Your PIN Numbers This form of fraud involves thieves who find creative ways to steal your credit or debit cards when you don't know about it. For example, sometimes people crawl behind rows in movie theaters and steal pocketbooks while you are watching a movie. When you return home they call you, identify themselves as bank security agents, and ask for your PIN numbers. If you hesitate, they simply ask you to phone their supervisor and give you an
44

accomplice's phone number to call. By doing so, they are able to get your PIN numbers and use the stolen debit cards to withdraw cash and make purchases. Legitimate Cards Legitimate cards follow standard specifications as to color, tint, quality, and style. Stamped letters and numbers are spaced evenly and sized equally. The signature panel is uniform in size and is almost impossible to scrape off. Altered Cards Altered cards are made from actual cards. The original stamped data is melted down or pressed out. Then, the card is re-stamped with legitimate account numbers, names, and expiration dates, which have been illegally obtained. On altered cards, the letters do not line up well and are usually irregular in size. Some credit card companies help merchants identify altered cards by making an authenticator machine available to merchants. The machine authenticates or verifies certain information that is encoded on the back stripe on the back of the card. . Counterfeit Cards Counterfeiters make most counterfeit cards by silk screening or painting the card logo and issuing institution's name onto a blank piece of card plastic. Because they are silkscreened, the cards don't look exactly like the real thing. Real credit cards are printed. Also, the signature panel on silkscreened cards may be glued or painted on and can be easily lifted or chipped. This panel may also appear uneven in size or placemen

Internet fraud The Internet Fraud refers to fraud conducted using one or more component of internet (email, chat rooms, web sites, or message boards). An attempt to buy goods or get money from credit card or with account information from some other persons credit card without his knowledge is credit card fraud. And with the increase in online transactions, Internet Credit Card Fraud has
45

also become a serious issue. Internet Credit Card Fraud Statistic shows this as among top 10 crimes reported under Internet fraud. During the last few years there has been an increase in online fraudulent of global scope and geometrically increasing proportions. There are now actual companies that specialize in spam and other illegal marketing techniques, like Phishing and Hacking, which take every opportunity to make a few pennies Internet for credit card and financial information to use for fraudulent purposes. Finally, identity thieves are reaping high rewards at the expense of both the target and the online retailer

Popular techniques used to carry out Internet Credit Card Fraud are: 1. Phishing: It involves randomly sending emails and asking for details such as bank information or credit card information. Once they take this information, they can use these to access active user accounts or open a new account with these details 2. Pharming : The hackers tamper with the domain name on the internet . They use the URL to access the site without the other person knowing the same. As soon as the user types in credit card details, the hacker hacks the same. He further uses these for carrying out fraud wallet is stolen, you may lose all your credit cards at one time.

46

IMPACT OF FRAUD ON CARDHOLDERS It is interesting to note that card holders are list interested party due to the fraud in credit card transaction as consumer liability is limited for credit card transaction By legislation prevailing in most of the countries. This is for both card present and non present scenario . Many bank have their own standards that limit consumer liability to a great extent. They also have card protection policy in place that cover most of the loses of the card holder. The card holder has to just report suspicious charges to the issuing bank. Which in turn investigate the issue with the acquirer and the merchant, and processes chargeback for disputed amount. IMPACT OF FRAUD ON MERCHANTS As a retail store merchant or an online merchant that accepts a credit card transaction and provides a product, you are often without recourse. If you accept a fraudulent credit card transaction, you lose both the payment and the product--and often pay a penalty fee. Consumers are protected from credit card fraud. When their card is used by a thief, the consumer is liable for only the charges. Some credit cards issuers offer zero consumer liability .Credit card issuers (banks) don't suffer any loss due to credit card fraud. Banks simply charge back to the merchant. A merchant is not protected from fraud by the credit card issuer, nor can most merchants find the individuals who perpetrated the fraud.

47

PLASTIC CARD PROTECTION Identity, allowing them to illegally purchase items or obtain credit. By following these simple guidelines, your potential for loss due to identity theft can be greatly reduced. Tips for protecting yourself against identity theft 1. Check your credit report on a regular basis to ensure the information is correct. 2. Immediately tear up (using a shredder is even better!) unsolicited credit card offers. 3. Never give personal information over the phone unless you initiated the phone call. 4. Never give a credit card number over the phone unless you have initiated the phone call. 5. Always be familiar with financial accounts that you currently maintain. Verify statements and other information sent by your financial institution for accuracy. ATM CARD PROTECTION PLASTIC CARD PROTECTION ATM fraud can occur when individuals lose their card, give their card to someone else to use, or when their Personal Identification Number's confidentiality is compromised. By following these simple guidelines you can greatly reduce your exposure to ATM fraud.

48

Tips for protecting yourself against ATM fraud 1. Never write your Personal Identification Number (PIN) on your card or in your wallet. Memorize your PIN as soon as possible. Do not reveal your PIN to anyone not authorized to use the account. 2. Never use your date of birth, social security number, license number or street address as a PIN -- those are the first numbers a crook will try. 3. Don't throw away your ATM receipts at the ATM location. Keep them to reconcile your account, then dispose of them properly when you get home. 4. . Review your statement promptly to ensure all transactions are accurate. Report any discrepancies immediately. 5. Destroy old ATM cards immediately after receiving your replacement cards.

49

ATM SCAMS In addition to the types ATM fraud that most of us are now aware of, there are two new types that can clean out your account quickly -- card withholding and skimming. Card withholding occurs when your card gets stuck in the ATM, you can't get it out, and you leave the card in the ATM planning to contact the financial institution the next morning. When you call you find that the card was not stuck in the ATM. What happens is that thieves put a substance into the ATM card slot which will cause your card to stick inside the ATM. They leave the ATM and wait for someone to attempt to use it. They then get in line behind you and try to watch you enter your Personal Identification Number (PIN). This is very common at drive-up ATM's where the user may not be paying attention to other people or cars nearby. The thieves even go so far as to put up a sign on the ATM stating: "If your card gets stuck, enter your PIN three separate times to retrieve it." This gives them three tries to watch you enter your PIN. After you leave frustrated, and you're planning to contact the ATM owner the next morning, they remove your card with a pair of pliers. They can then use your card at other ATM's and Point-of-Sale (POS) terminals. Skimming is done at businesses that offer Point-of-Sale (POS) devices for you to pay with your ATM card, such as gas stations. The thieves convince an employee to allow them to connect a lap top computer to the POS machine. The lap top is usually stored under the counter where the POS device is located. When you swipe your card in the POs device to make a payment the information on the magnetic strip on your ATM card is copied and loaded onto a disk. Thieves may also install a hidden video camera that records you entering your PIN.

50

They then match the magnetic information to the PIN and access your accounts. Precautions to take for countering these scams: 1Before inserting your ATM card into an ATM inspect the card slot for any residue. 2 If there is residue, don't use that ATM. If there is a notice on the ATM about entering your PIN several times, don't use that ATM. 3 Always cover your hand when entering your PIN: if the thieves don't have your PIN, they can't access your account. Actions for Fraud Victims If you suspect fraud, it is important to act quickly to minimize potential damage and your own liability. It is important to keep a detailed account of conversations you have with authorities and financial institutions.

Credit Bureaus. Immediately call the fraud units that your account include a statement referencing the possibility of fraud. Creditors. Contact all creditors immediately with whom your name has been used fraudulently -- by phone and in writing. Monitor your accounts closely for any further fraudulent activity.

51

Law Enforcement. Report the crime to police with jurisdiction in your case. Provide any documentation that you have collected. Get a copy of your police report. Keep the phone number of your fraud investigator handy and give it to creditors and others who require verification of your case. Financial Institutions. If you have checks stolen or bank accounts set up fraudulently, contact the institution to report the crime. Put stop payments on appropriate outstanding checks. Close your checking and savings accounts and open new accounts. If your ATM card is stolen or compromised, get a new card and PIN. When choosing a PIN, don't use common numbers like the last four digits of your Social Security number, your date of birth, license number or street address. Postal Service. Notify the local Postal Inspector if you suspect an identity thief has filed a change of your address with the post office or has used the mail to commit credit or bank fraud. Social Security Administration. Call to report fraudulent use of your Social Security number. Civil Courts. If a civil judgment has been entered in your name for actions taken by your impostor, contact the court where the judgment was entered and report that you are a victim of identity theft. If you are wrongfully prosecuted for criminal charges, contact the state Department of Justice and the FBI.

52

Protect yourself against "Phishing Scams" 1. If you get an email or pop-up message that asks for personal or financial information, do not reply. And don't click on the link in the message, either. Legitimate companies don't ask for this information via email. If you are concerned about your account, contact the organization mentioned in the email using a telephone number you know to be genuine, or open a new Internet browser session and type in the company's correct Web address yourself. In any case, don't cut and paste the link from the message into your Internet browser phishers can make links look like they go to one place, but that actually send you to a different sites. 2. Never give your personal information via e-mail. 3. When entering personal account information, verify that you are on secure web site. 4. If the web site is secure, you will find "https" in the address and a closed padlock in your browser's toolbar. 5. Use anti-virus and anti-spyware software, as well as a firewall, and update them all regularly. Some phishing emails contain software that can harm your computer or track your activities on the Internet without your knowledge. Anti-virus software and a firewall can protect you from inadvertently accepting such unwanted files.

53

PROTECTION AGAINST VISHING SCAM TIPS FOR CREDIT CARD CUSTOMERS WHEN RECEIVING EMAIL THAT MAY BE FRAUDLENT

1. Buyers need to be cautious about e-mails that offer credit services because many unsolicited e-mails are fraudulent. Buyers also should not simply click on Internet hyperlinks within received e-mails. Instead, buyers can type in the known URL into the address bar of the web browser. 2. Buyers need to be wary of e-mails which offer prizes or discounts and then asking them to choose a User ID and Password. Most people use the same access information for several accounts because they are easier to remember. The thieves will collect your login information and try them at other sites, like financial institutions or credit-card sites. 3. Buyers should never respond to e-mails that request for credit card information and also do not ever respond to e-mails that ask them to go to a website to verify personal (and credit card) information. If buyers have doubts about the authenticity of an e-mail, do not respond to the e-mail.

54

Merchant Credit Card Fraud Protection However, as an online merchant, you must be prepared for the bad with the good. Here are some tips to protect your business from fraud: 1. Identify Big Spenders Thieves will often pay excessive fees to ship products quickly. They also like big-ticket purchases. If they can use the stolen card, receive the merchandise and resell it promptly, they make a large profit. Early detection of these activities and follow-up can save you money in the long run.

55

2. Secure Payment Gateways Securing your payment gateway - the behindthe-scenes transfer of personal information between your transaction page (the page where the order is placed), the merchant account (your bank) and the credit card company - is one of the most important components required to accept credit cards for your ecommerce business.

Credit card processing services This service offer fraud protection and secure gateways for their clients. They can be expensive, but no ecommerce business can operate without it. Another option - look for an all-in-one ecommerce software solution that includes credit card processing. Whether you decide to purchase a separate credit card processing service or an all-in-one ecommerce solution, the following fraud protection tools should be required features: Secure Socket Layer Encryption (128-bit encryption) System This protection system keeps all credit card data and personal information safe from the prying eyes of hackers and thieves. Rules-Based System for Credit Acceptance or Denial This system relies on a series of steps to verify card authenticity. If any of the steps are not satisfied, the transaction is terminated. Such steps include: Verifying the billing address with the address registered on the credit card. Identifying the access code, a 3 to 4-digit number printed on all major credit cards. Most often, without a card this number can not be provided. Discrepancies between cardholder name and the credit card number issued. As a merchant, the financial responsibility of all transactions belongs to you. Be aware of the warning signs and protect your business by selecting a payment gateway that provides ample protection for your accounts. By taking the offense, you can avoid many fraudulent purchases and concentrate on the important task of selling your product.

56

Fraud prevention and management With all the negative impacts of fraudulent credit card activities financial and product losses, fines, loss of reputation, etc, and technological advancements in perpetrating fraud it's easy for merchants to feel victimized and helpless. However, technological advancements in preventing fraud have started showing some promise to combat fraud. Merchants and Acquirers & Issuers are creating innovative solutions to bring down on fraudulent transaction and lower merchant charge back rates. One of the main challenges with fraud prevention is the long time lag between the time a fraudulent transaction occurs and the time when it gets detected, i.e., the cardholder initiates a chargeback. Analysis shows that the average lag between the transaction date and the chargeback notification could be as high as 72 days. This means that, if no fraud prevention is in place, one or more fraudsters could easily generate significant damage to a business before the affected stakeholders even realize the problem. FRAUD PREVENTION AND TECHNOLOGY While fraudsters are using sophisticated methods to gain access to credit card information and perpetrate fraud new technologies are available to help merchants to detect and prevent fraudulent transactions. fraud detection technologies enable merchants and banks to perform highly automated and sophisticated screenings of processing unnecessary delay in processing order in coming transactions and flagging suspicious transactions. While none of the tools and technologies presented here can by itself eliminate, fraud each technique provides incremental value in terms of detection ability. As it will be discussed later, the best practice implementations often utilize several of these fraud prevention techniques, if not all of the tools discussed here. The various fraud prevention techniques are discussed below:

57

MANUAL REVIEW This method consists of reviewing every transaction manually for signs of fraudulent activity and involves a exceedingly high level of human intervention. This can prove to be very expensive, as well as time consuming. Moreover, manual review is unable to detect some of the more prevalent patterns of fraud , such as use of a single credit card multiple times on multiple locations (physical or web sites) in a short span.

ADDRESS VERIFICATION SYSTEM This technique is applicable in card -not-present scenarios. Address Verification System (AVS) matches the first few digits of the street address and the ZIP code information given for delivering/billing the purchase to the corresponding information on record with the card issuers. A code representing the level of match between these addresses is returned to the merchant. AVS is not much useful in case of international transactions.

METHODS The Card Verification Method3 (CVM) consists of a 3- or 4-digit numeric code printed on the card but is not embossed on the card and is not available in the magnetic stripe. The merchant can request the cardholder to provide this numeric code in case of card-not-present transaction and submit it with authorization. The purpose of CVM is to ensure that the person submitting the transaction is in possession of the actual, card since the code cannot be copied from receipts or skimmed from magnetic stripe. Although CVM provides some protection for the merchant, it doesnt protect them from transactions placed on physically stolen cards. Furthermore, fraudsters who have temporary possession of a card could, in principle, read and copy the CVM code.

58

NEGATIVE AND POSITIVE LISTS A negative list is a database used to identify high-risk transactions based on specific data fields. An example of a negative list would be a file containing all the card numbers that have produced chargebacks in the past, used to avoid further fraud from repeat offenders. Similarly a merchant can build negative lists based on billing names, street addresses, emails and internet protocols (IPs) that have resulted in fraud or attempted fraud, effectively blocking any further attempts.

A merchant/acquirer could create and maintain a list of high-risk countries and decide to review or restrict orders originating from those countries. Another popular example of negative list is the SAFE file distributed by MasterCard to merchants and member banks.

This list contains card numbers, which could be potentially used by fraudsters, e.g., cards that have been reported as lost or stolen in the immediate recent past. Positive files are typically used to recognize trusted customers, perhaps by their card number or email address, and therefore bypass certain checks. Positive files represent an important tool to prevent unnecessary delay

59

PAYER AUTHENTICATION Payer authentication is an emerging technology that promises to bring in a new level of security to business-to-consumer internet commerce. The first implementation of this type of service is the Verified by Visa (VbV) or Visa Payer Authentication Service (VPAS) program, launched worldwide by Visa in 2002. The program is based on a Personal Identification Number (PIN) associated with the card, similar to those used with ATM cards, and a secure direct authentication channel between the consumer and the issuing bank. The PIN is issued by the bank when the cardholder enrolls the card with the program and will be used exclusively to authorize online transactions. When registered cardholders check out at a participating merchants site, they will be prompted by their issuing bank to provide their password. Once the password is verified, the merchant may complete the transaction and send the verification information on to their acquirer LOCKOUT MECHANISMS Automatic card number generators represent one of the new technological tools frequently utilized by fraudsters. These programs, easily downloadable from the Web, are able to generate thousands of valid credit card numbers. The traits of frauds initiated by a card number generator are the following: Multiple transactions with similar card numbers (e.g. same Bank IdentificationNumber (BIN)) A large number of declines Acquiring banks/merchant sites can put in place prevention mechanisms specifically designed to detect number generator attacks.

60

FRAUDULENT MERCHANTS Both MasterCard and Visa publish a list of merchants who have been known for being involved in fraudulent transactions in the past. These lists (NMAS - from Visa and MATCH - from MasterCard) could provide useful information to acquirers right at the time of merchant recruitment preventing potential fraudulent transactions

RECENT DEVELOPMENT IN FRAUD MANAGEMENT

The technology for detecting credit card frauds is advancing at a rapid pace rules based systems, neural networks, chip cards and biometrics are some of the popular techniques employed by Issuing and Acquiring banks these days. Apart from technological advances, another trend which has emerged during the recent years is that fraud prevention is moving from back-office transaction processing systems to front-office authorization systems to prevent committing of potentially fraudulent transactions. However, this is a challenging trade-off between the response time for processing an authorization request and extent of screening that should be carried of.

61

RISK SCORING TECHNOLOGIES

Risk scoring tools are based on statistical models designed to recognize fraudulent transactions, based on a number of indicators derived from the transaction characteristics. Typically, these tools generate a numeric score indicating the likelihood of a transaction being fraudulent: the higher the score, the more suspicious the order.

Risk scoring systems provide one of the most effective fraud prevention tools available. The primary advantage of risk scoring is the comprehensive evaluation of a transaction being captured by a single number. While individual fraud rules typically evaluate a few simultaneous conditions, a risk-scoring system arrives at the final score by weighting several dozens of fraud indicators, derived from the current transaction attributes as well as cardholder historical activities. E.g., transaction amounts more that three times the average transaction amount for the cardholder in the last one year. The second advantage of risk scoring is that, while a fraud rule would either flag or not flag a transaction, the actual score indicates the degree of suspicion on each transaction. Thus, transactions can be prioritized based on the risk score and given a limited capacity for manual review, only those with the highest score would be reviewed. NEURAL NETWORK TECHNOLOGIES Neural networks are an extension of risk scoring techniques. They are based on the statistical knowledge contained in extensive databases of historical transactions, and fraudulent ones in particular. These neural network models are basically trained by using examples of both legitimate and fraudulent transactions and are able to correlate and weigh various fraud indicators (e.g., unusual transaction amount, card history, etc) to the occurrence of fraud. A neural network is a computerized system that sorts data logically by performing the following tasks:

62

1. Identifies cardholders buying and fraudulent activity patterns. 2. Processes data by trial and elimination (excluding data that is not relevant to the pattern). 3. Finds relationships in the patterns and current transaction data. The principles of neural networking are motivated by the functions of the brain especially pattern recognition and associative memory. The neural network recognizes similar patterns, predicting future values or events based upon the associative memory of the patterns it has learned. The advantages neural networks offer over other techniques are that these models are able to learn from the past and thus, improve results as time passes. They can also extract rules and predict future activity based on the current situation. By employing neural networks effectively, banks can detect fraudulent use of a card, faster and more efficiently.

63

BIOMETRICS Biometrics is the name given to a fraud prevention technique that records a unique characteristic of the cardholder like, a fingerprint or how he/she sign his/her name, so that it can be read by a computer. The computer can then compare the stored characteristic with that of the person presenting the card to make sure that the right person has the right card. Biometrics, which provides a means to identify an individual through the verification of unique physical or behavioral characteristics, seems to supercede PIN as a basis for the next generation of personal identity verification systems. There are many types of biometrics systems under development such as finger print verification, hand based verification, retinal and iris scanning and dynamic signature verification Smart card To define in the simplest terms, a smart card is a credit card with some intelligence in the form of an embedded CPU. This card-computer can be programmed to perform tasks and store information, but the intelligence is limited meaning that the smart card's power falls far short of a desktop computer. Smart credit cards operate in the same way as their magnetic counterparts, the only difference being that an electronic chip is embedded in the card. These smart chips add extra security to the card. Smart credit cards contain 32-kilobyte microprocessors, which is capable of generating 72 quadrillion or more possible encryption keys and thus making it practically impossible to fraudulently decode information in the chip.The smart chip has made credit cards a lot more secure; however, the technology is still being run alongside the magnetic strip technology due to a slow uptake of smart card reading terminals in the world market Smart cards have evolved significantly over the past decade and offer several advantages compared to a general-purpose magnetic stripe card.

64

The advantages are listed below: Stores many times more information than a magnetic stripe card. Reliable and harder to tamper with than a magnetic stripe card. Performs multiple functions in a wide range of industries. Compatible with portable electronic devices such as phones and personal digital assistants (PDAs), and with PCs. Stores highly sensitive data such as signing or encryption keys in a highly secure manner Performs certain sensitive operations using signing or encryption keys in a secure fashion. A consortium of Euro pay MasterCard and Visa (EMV) recently issued a set of specifications for embedding chips in credit cards and processing transactions from such cards. MasterCard and Visa have also issued deadlines for compliance with these specifications indicating that banks will have to bear a large portion of fraud losses if they do not comply with EMV specifications. However, the market response has been slow so far due to large investments needed in implementing the EMV compliant programs.

65

RBI GUIDLINES ON PLASTIC CARD FRAUD 1. The new Reserve Bank of India (RBI) guidelines, which becomes effective from August 1, to provide a third-factor identification for all online transactions . 2. The mandatory third verification is in addition to the card number and the three- or four-digit card verification value (CVV) number that appears on the back of a credit card. 3. The RBI has asked banks to provide credit card users with an additional authentication/validation password for all online card transactions. 4. RBIs purpose behind these guidelines is to enhance the security of online transactions, so as to reduce online credit/debit card fraud. 5. To prevent the card frauds, which are mostly perpetuated by impersonation through stolen, lost and hacked cards, the central bank RBI has already suggested a number of steps to be implemented by the banks. 6. On top of it, the banks are now asking the merchants to further verify the identity of the cardholders through authoritative photo identity proofs like PAN Card, Passport or Voter ID cards. 7. The countrys largest private sector bank, ICICI Bank, also the biggest credit card issuer in India, has communicated to its customers that photo identity proof might be required at merchant outlets for high-value card transactions.

66

8. The issue of card fraud has even reached Parliament and in February the government informed the Lok Sabha that ICICI Bank alone reported more than 8,000 cases of credit card fraud worth over Rs 11 crore to the RBI between April and December 2008. 9. A customer should not be forced to opt for services in this regard. Banks should provide clear information to their customers about the risks and benefits of using e-banking delivery services to enable customers to decide on choosing such services. 10. Concerned over rising incidents of cyber frauds, the RBI will soon ask banks to shift to chip based ATM cards from the existing magnet strips ones and upgrade the currency vending machines. While pitching for chip-based cards, the report said, it is difficult to copy and make their duplicates as compared to the existing magnet strips ones. 11. RBI caution against online phishing, RBI has clarified that e-mail sent in its name as inviting bank customers to update their bank account details against online phishing is bogus 12.RBI asks banks to setup system of online alerts for all types of transactions irrespective of the amount involving usage of cards at various channels. 13. RBI has asked all banks to make investor awareness as one of the agenda items.

67

Plastic money scam: 2 held for cloning cards A 28-year-old class 8 school dropout and his associate were arrested for cloning and fraudulently using credit and debit cards of several banks in Delhi, police said on Saturday. Meenu Chaudhary, DCP (northwest), said Rajesh Kumar, an ex-finance company executive residing in Shahdara and his friend Kamal, 26, who also lives in the same area, had made illegal purchases amounting to more than R10 lakh through such cloned cards till date. Rajesh was caught red-handed while attempting to use one such cloned debit card at an ATM machine in Adarsh Nagar on July 9, the police said. According to police, initially, the duo used to take the service of petrol pump employees who would hand over card reading machines used there. The employee would swipe a particular customer's card on the said machine discreetly, before handing it over to Vipin who used to feed the said data on another inoperative debit/credit card with the help of a computer, police said. Then, those cards would be used for withdrawing cash and for shopping. Establishments where these fake cards were used are being identified. We appeal to the public to be more vigilant, the DCP said.

68

Analysis of Survey Report :

1.Does your bank offer plastic card services ? ANS. Yes every bank provide plastic card services 2. Has your bank ever face any problem with plastic card in term of theft skimming and phishing ?

80% of bank faces theft 20% of bank faces skimming 20% of bank offer phishing

69

1. Does your bank offer ATM CUM DEBIT card services ? ANS: Yes every bank that has been surveyed offer ATM CUM DEBIT CARD services.

4.Has plastic fraud ever occurred in your bank ?

70

5. which types of plastic cards have more risk credit card OR debit card?

IDBI do not offer credit card and they dont think that debit card gave any risk.

71

6. Does your bank provide advisory services on plastic fraud? IDBI and ICICI offer advisory services on plastic fraud.

72

7. Does your bank provide card over internet transaction?

73

8. Has your bank ever come across payment fraud? AXIS Bank and ICICI Bank came across payment fraud

74

9.What credit limit does bank offer ?

10. IS debit card better than cash or cheque? ANS: Yes all banks that has been surveyed thinks that debit card is better

than cash 11. Do I have to pay fees interest when we use my VISA DEBIT CARD? ANS: No interest or fees have to be paid when we use debit cards 12. What is ICICI withdrawal at NON ICICI ATM? ANS: ICICI withdrawal at NON ICICI ATM is less than 50,000

75

CONCLUSION

As card business transactions increase, so too do frauds. Clearly, global networking presents as many new opportunities for criminals as it does for businesses. While numerous advantages and opening up new channels for transaction business, the offering internet has also brought in increased probability of fraud in credit card transactions. The good news is that technology for preventing card frauds is also improving many folds with passage of time. Reducing cost of computing is helping in introducing complex systems, which can analyze a fraudulent transaction in a matter of fraction of a second. It is equally important to identify the right segment of transactions, which should be subject to review, as every transaction does not have the same amount of risk associated with it. Finding the optimally balanced total cost of fraud and other measures outlined in this project can assist acquiring and issuing banks in combating frauds more efficiently Plastic money faces the risk of being affected by criminals. With the growth in the number of plastic card users and increase in the number of transaction and all this being carried out through internet , the existing security measures have proved largely ineffective. This is proved by the everyday number of cases regarding card fraud. However, a little caution in usage and following a disciplined way of using the cards will ensure that you not only enjoy the benefits of using plastic money, but also that the sanctity of cards are not violated. .

76

Webliography www.google.com www.action fraud.com www.rbiorg.com www.icici.com www.hdfc.com www.icfaipress.org www.sbi.com Bibliography Cash to plastic fraud Manish Ashiya Financial services and system Dr S Gurusamy Credit card frauds- B Sujatha

77

78

79

80