How do Banks Protect your Credit Cards?

Ensuring our online security has never been as crucial as it is today. While we have all faced digital dangers in the past, the threats have reached entirely new heights due to the rapid development of technology and our increasing online presence. We are no longer using the internet only to browse and read websites and play games. Now, it has infiltrated almost every aspect of our professional and personal lives, from working or studying to managing our finances or contacting our healthcare providers. While we can face fraudulent actions in any of these areas of life, the financial one is in the biggest danger.

Fraudsters' main goal is to make a profit, and what better way to do it than by exploiting innocent and unsuspecting victims by stealing from them. This is why credit card fraud is on the rise, with the value of credit card fraud reaching $32 billion in 2021, according to Statista. Fraudsters show no signs of stopping, putting every person that uses a credit card and any business that takes credit card payments in danger of credit card fraud. It is imperative that everyone from individuals, companies, and financial institutions is aware of the risks and take all necessary steps to protect against credit card fraud.

How credit card fraud happens

Credit card fraud happens when a fraudster or cybercriminal gains access to your account information or credit card details and uses it to make unauthorized purchases. There are various ways in which fraudsters can get your details:

• Gaining access to your lost or stolen credit cards through a data breach or by stealing them from your person
• Stealing your card details in public spaces by skimming your credit card or even just by looking over your shoulder
• Hacking your computer
• Through phishing attempts, such as fake phone calls or emails
• Gaining access to your accounts through account takeover or identity theft
• Stealing your mail

Once they get access to your card details, they can use them to make unauthorized purchases and steal your money. Unfortunately, there is no fool-proof way to stop fraudsters, especially with them constantly coming up with new ways to conduct their malicious actions. But that doesn't mean there is nothing we can do. With banks implementing various credit card fraud detection methods and individuals and businesses taking necessary steps to protect themselves, we can minimize the risks.

How are banks protecting credit cards and their users?

Fraudsters are not the only ones constantly coming up with new updated ways to improve their actions. Banks or credit card issuers are not standing still and waiting for fraudsters to exploit them; they are also continuously improving their security measures. In addition to the fact that it helps them protect their clients and ensure their satisfaction, it also helps financial institutions to reduce their financial burden. Financial institutions such as banks and credit card issuers are often responsible for the financial liability of credit card fraud, which is why it is in their interest to invest all their efforts in preventing fraud before it happens.

The financial industry has changed a lot in the past few decades, from wire transfers to mobile payments and online banking. Some banks operate exclusively online, and crypto-wallets have become a part of our reality. Digital banking has become the new normal, and we are not going back. But, along with the benefits, these changes also brought an increase in dangers the financial institutions face. To accommodate these changes, banks had to update their systems and undergo digital transformation. This ensures all the processes continue running smoothly while remaining protected from fraudsters and cyberattacks.

Regardless of which bank you use or who your card provider is, they all have the same goal: to keep fraudsters away from your finances. This is done in various ways, as every financial institution has different requirements and preferences. This is why most financial institutions create their unique cybersecurity strategy to ensure maximum protection. At the same time, all of them have one thing in common: the use of artificial intelligence (AI) and machine learning.

How do artificial intelligence (AI) and machine learning protect my cards?

Artificial intelligence and machine learning are everywhere, making our lives easier at every turn. From using it to optimize search engines or even to detect roadside litter, it makes a big difference in every aspect of our life but especially in cybersecurity. It allows banks to determine the risks of every transaction while ensuring legitimate transactions are processed in real-time without causing user friction. In the past, real-time risk authentication was done manually, resulting in a large number of false positives, with banks unnecessarily challenging legitimate transactions. This would often result in angry and unsatisfied customers and a loss of revenue.

Implementing AI and machine learning can change this, as they can be used to analyze hundreds of pieces of data and determine risk more efficiently.

Every time transaction takes place, it analyzes:

• Type of transactions
• Its geo-location
• Users' digital footprint
• User's spending history
• Unusual circumstances
• Device fingerprint
• Other relevant factors

Because it considers all this available data, it can produce an effective real-time risk score indicating the probability of fraud. If the risk is high, the bank can block the transaction or ask the user to provide them with additional authentication that confirms they are a legitimate user. For example, your bank would register differences in your IP address and send you a text message with a one-time passcode that you can use to confirm that you intended to make that purchase. This way, any unauthorized purchase can be stopped before the fraudsters can get away with your money.

Conclusion

Unfortunately, fraudsters are everywhere, constantly looking for an opportunity to steal somebody's money or exploit them. This is especially true when it comes to your finances, where they can exploit you, your bank, and the merchant at the same time. This is why protecting your financial health needs to become a priority. You have seen now what banks do to protect your cards from fraudsters and cybercriminals, but the fight doesn't stop there. To ensure your finances remain safe, you also need to start taking steps in the right direction regarding your online behavior. Be mindful of your actions and don't put yourself at unnecessary risk, and you will significantly reduce the online threats.