CREDIT CARD FRAUDS – RESEACH PAPER

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BANGALORE
 INDEX –CREDIT CARD FRAUDS

S.NO Main Topic Slide No’s

1. INTRODUCTION- CREDIT CARD & CREDIT CARD FRAUDS 3 to 10

TYPES / METHODS OF CREDIT CARDS FRAUDS

II 11 to 19

III PREVENTIVE MEASURES OF CREDIT CARD FRAUDS 20 to 23

IV THE CONCLUSION 24

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INTRODUCTION – HISTORY OF THE CREDIT CARD AND BANKING PAYMENT SYSTEM
EVALUATION

 Indian Banking Payments and Settlement System evaluation from 1980 .

 Banks has used the Technology and most of the Banks has used the CBS which facilitates the user to avail

the services with out visiting the Bank offices .

 RBI adopted the new system for clearing and settlement system and adopted a computerized system in

1988.

 The Indian Government has brought Payments and Settlement System Act(PASS) in 2007 which will

enable smooth process of various payments under banking system .

 The National Payments Corporation of India (NPCI) 2008 , has introduced the various Payments System

for larger payments as well as retails Payments . For Instance , RTGS, NEFT, IMPS and UPI etc.

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INTRODUCTION – HISTORY OF THE CREDIT CARD AND BANKING PAYMENT SYSTEM
EVALUATION

 Payments Categories Under Indian Baking System.

Payments

Large Value
Retail Payments
Payments

Inter Banks Payments International Paper Based

Cash Payments Card Based Payments Electronic Payments
Payments Payments

1.Cheques
RTGS
2.DD's Credit Card
NEFT
3. Payment Orders Debit Card
etc
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INTRODUCTION – HISTORY OF THE CREDIT CARD AND BANKING PAYMENT SYSTEM
EVALUATION

 The Evaluation of E-Payments and Concept Of Plastic Money was introduced by banks . For Instance , Debit Card ,
Credit Card and Online Payments etc.;
 Credit Card (CC) : “ CC are one of the instruments of the payment which allows the user to make payment for
purchases of goods and services”
 Revolving Facility .
 Amount and Period Limit.
 Credit Facility and Repayment .
 Interest and Other Charges in delayed Payments. And
 Other Recovery Methods .

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 INTRODUCTION – HISTORY OF THE CREDIT CARD AND BANKING PAYMENT SYSTEM
EVALUATION

 The First Credit Card was Introduced In The World  The First Credit Card Introduced In Indian
Year Innovation
1946 First Bankcard, named “Charge-It”, was introduced by John Biggins, a banker in Year Innovation
Brooklyn.
1950 Dinners Club Card is the next development in the field of a credit card. 1981 Andhra Bank and Central Bank of India has introduced the credit card.
1951 Frankin National Bank in New York’s Starts a credit card plan.
1959 American Express Introduce the Plastic Card.
1989 ANZ Grindlays Bank came with Classic Card.
1966 Barclays Bank was the first British bank to introduce credit card known as “Barclays
card”.
1990 Citi Bank’s Master Card became popular.
1966 National credit card system was formed by the Inter Bankcard Association. This Card is
known as the Master card. Formerly the credit cards are issued only to the local
customer of the Bank.
1977 Lloyds Bank introduces “Access Card.”

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 INTRODUCTION – II. PARTIES TO THE CREDIT CARD TRANSACTIONS AND PROCESS .

1. The Various Parties to the Credit Card Transaction .

The above Diagram Represents the Various parties to the Credit
cards transactions and Brief details as below
 Consumer : The holder and Initiator of The
Transaction .
 Merchant : Who accepts and Collects the Money for
Exchange of Goods / Services .
 Processor : Facilitator for communication of the
transactions .
 Card Network : Receives information from Processor and
Pass it to Bank .
 Consumer Bank : It Allows the processor to release the
Payment to Merchant upon verifying the Various parameters
of the transaction .

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 INTRODUCTION – II. THE CREDIT CARD TRANSACTIONS PROCESS AND PARTIES
INVOLVED .

The Below are the 4 Parties involved in processing and settlement of

Credit Cards Payments
 Merchant Bank / Acquiring Bank : Which Holds the Funds of Merchant /
Business house , For Instance , RuPay , PayPal. Etc.
 Credit Card Process : It Will Facilitates the Message to pass from
Merchant to Issuing Bank . As depicted In step 2 ,5 and 6.
 The Card Network / Association : It Will facilitate the data between
Consumer Bank and Acquiring Bank . As depicted in 3 and 4 in the
picture.
 Consumer Bank / Issuing Bank : The Sponsoring Bank where cardholder
has the card .

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 INTRODUCTION – III. TYPES OF CREDIT CARDS .

Nowadays, all banks are issuing the credit card which is mainly for shopping and some credit cards included travel
privilege. Below are the type of cards which are used in India , Their Brands will be either of VISA , MASTER or
RuPay etc.
 SBI Card Elite
 Simply CLICK SBI Card
 HDFC Regalia First Credit Card
 ICICI Bank Platinum Chip Card
 Indian Oil Citibank®Platinum Credit Card. And
 HSBC Platinum Credit Card.

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 INTRODUCTION – IV. LEGAL FRAME WORK – CREDIT CARD OPERATIONS IN INDIA.

 The RBI Master Circular Issues on 1st July 2015 .

 Instructions/guidelines issued on credit card operations of banks and NBFCs and debit cards/pre-paid card
operations of banks.
 Banking Regulation Act 1949.
 Reserve Bank of India Act 1935. and
 Reference to PASS -Payment and Settlement System Act 2007.

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 TYPES / METHODS OF CREDIT CARDS FRAUDS

FRAUD : With Reference to RBI Study Group on Larger Banks has defined the fraud as below
“A deliberate act of omission or commission by any person, carried out in the course of a banking transaction or in the
books of accounts maintained manually or under computer system in banks, resulting into wrongful gain to any person
for a temporary period or otherwise, with or without monetary loss to the bank”
 Deliberate Act of Omission or Commission
 By any Person
 In the course of Banking Transaction / Books of accounts Maintained
 Manually / Computer System
 Wrongful Gain to a Person
 Temporary Period or Otherwise
 With or Without Loss .

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 TYPES / METHODS OF CREDIT CARDS FRAUDS – CREDIT CARD FRAUD

Credit Card Fraud –

1. “Unauthorized account activity by a person for which the account was not intended.”
2. “The Unauthorised use of an individual’s Credit Card or card Information to make a purchase or to remove funds from the
card holder’s Account”.
 Unauthorised account Activity .
 By a Person .
 The Account not Intended .
 To Gain by monetary wise or otherwise .

The above Frauds can be done in two ways as below

1. Online Frauds and
2. Offline Fraud .
Whether the user uses technology in both the places but one is through internet and another is offline methods with out using
the internet.
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 TYPES / METHODS OF CREDIT CARDS FRAUDS – CREDIT CARD FRAUD

 RBI has replied to query raised an activist for Credit card frauds
and debit cards frauds from January 2015 to December 2017.
 Credit Cards Frauds of 35,551 and amount to the tune of Rs
14,165 lakhs .
 Debit Card Frauds 21,860 and amount to the tune of Rs 14,869
Lakhs .
 RBI circular-Dated July 2017 for the protection of customer in
case frauds .

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 TYPES / METHODS OF CREDIT CARDS FRAUDS–METHODS OF CREDIT CARD FRAUD .

 There are Several ways and Means to do the credit cards Frauds by utilizing online and offline resource and the
history of frauds which are occurrence through credit card given below

Method Percentage
Loss or stolen Card 48%

Identity Theft 15%

Skimming (or Cloning) 14%

Counterfeit Card 12%

Mail intercept Fraud 6%

Others 5%

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 TYPES / METHODS OF CREDIT CARDS FRAUDS–TECHNIQUES OF CREDIT CARD FRAUDS

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 TYPES / METHODS OF CREDIT CARDS FRAUDS– TRADITIONAL TECHNIQUES.

 Traditional Techniques
 Application Frauds : Stealing of Personal Information .
 Account Take Over: Hijacking of Personal accounts of Others and Modify the
credentials so that will be utilized for personal gain.
 Intercept Fraud : Stealing the Credit card Information through the postal before
it’s reaches to the beneficiary .
 Lost or Stolen Card : The fraudster will utilize the stolen/ lost credit card
information to do the fraud.
 Merchant Collusion : The Merchant or Employees of the Merchant collude to do
fraud by utilizing their customer card Details .
 Card present Fraud : The card will be present while doing the credit card Fraud .

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 TYPES / METHODS OF CREDIT CARDS FRAUDS– MODERN TECHNIQUES.

 Modern Techniques
 Fake Cards : Creating the Duplicate card which will be used to purchase of Goods and
Services .
 Doctored Cards : By Erasing the Metallic Strip of the Existing Credit Card , alter details on
the card to match those of a valid card
 Skimming : Coping the Information stored in Magnetic Strip to another Magnetic strip and
creating the another card .
 Site Cloning : The Fraudster will clone the entire business site of the merchant and steal the
customer information whoever do the on line transaction through the website .
 False Merchant Site: This is more similar to Site cloning but here the customer will enter the
details for verification of age where the fraudster steals the information from the customer.
 Triangulation : The fraudster will act as middleman between customer and Merchant.
 Card Not Present (CNP) : These frauds will be done through the email, telephone , or over the
internet.

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 TYPES / METHODS OF CREDIT CARDS FRAUDS – SBI FRAUD

 Fraudsters : Vijay Kumar Sharma , Sandeep Bajaj , Abhijit

Shrivastava , Sita Kumari and Ashutosh Shrivastava.
 The fraudster team had recruited 22 Telecallers and
Fraudster team would obtain the Name , mobile name and
city name .
 Then The Telecallers would call customers pretending to
be SBI employees to get CVV and OTP.
 Targeted only customers who will speak Hindi and English
.
 The stolen funds were distributed among the fraudster
team.
 The amount of frauds to the tune of Rs 5 Cores .

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 TYPES / METHODS OF CREDIT CARDS FRAUDS– IMPACT

 The Credit Card frauds are day by day showing the upwards trend
which will impact the following parties in terms of financial and
other damages .
 The Cardholder
 The Card Holder will be least impact on credit card frauds if the cardholder
takes the precautionary steps on time which has provided by RBI and other
rules and regulations of the Banks .
 Merchants :
 The merchant will be having the high impact with credit card frauds which
will be included cost of goods , shipping cost , card association fee,
merchant bank fee , administrative cost and loss of reputation .
 Banks (Issuer /Acquirer)
 The Banks will be having the cost in terms of manpower and administrative
cost , IT system deployment , Reputation and Fraud Prevention cost .

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 PREVENTIVE MEASURES – THE ARCHITECTURE

 There is a Architecture which will be helping to prevent the

Credit Card Frauds in today’s Technology world , which is
know as Credit Card Fraud Detection System (CCFDS).
 The Data Preparation Phase
 This involves the credit cardholder transaction analysis in terms of
demographic details and transaction variables and the accumulation of
data . This is called strategic areas where the decision has taken what
kind of architecture required for CCFDS.
 Implementation phase
 This involves implementation of Prevention and Detection system by
the stake holders of the credit cards transaction .
 There will be a training system for the stake holders who will implement
the prevention and detection system .

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 PREVENTIVE MEASURES – TECHNIQUES .

 A fusion of Dempster- Shafer theory and Bayesian  Clustering technique

Learning  Cluster techniques are used to detect and prevent the
 Rule Based Filtering behavioural credit card frauds.
 Dempster-Shafer Theory  Neural Network
 Bayesian Learning
 The neural network usually involves a large number of
 Probabilistic credit card fraud Detection system processors operating in parallel that helps in detecting the
fraudulent transaction.
 Mathematical Probabilities used to prevent the fraud .
 Credit Verification Values
 The advanced Address verification system
 This method protects from the offline credit card fraud as
 This involves the multiple checks while doing the Credit Card
Transaction . the physical possession of the card is necessary.

 Decision tree  Chip and Pin

 the attribute names are placed on the nodes and values of the  These cards are consisting of the EMV Chips and the PIN
attribute are placed on the edge. Then the Leaves Consists of instead of the signature which proves that the customer is
the intensity factor genuine

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 PREVENTIVE MEASURES – USER PRECAUTIONS

 The User has to take the following precautions to avoid the credit card
transactions .

 Avoid Sharing the Credit card details

 Keep credit card at safe locations

 Use Credit card Safely on the Internet.

 Be an alert customer

Fraudsters are continuously finding new ways to trick you. The only way to
avoid such tricks is to be watchful and take utmost care of your credit cards.

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 PREVENTIVE MEASURES – FRAUD REPORTING AND PROTECTIONS BY THE USER

 The Cardholder should take the following steps when they comes
know the fraud
 Compliant to Bank and Customer care centre of the Bank
 Document Evidence
 Timing and Days of reporting
 Compliant at Police Stations
 U/S 156 (3) of CPC – FIR can be lodged .
 Cyber Cell Reporting .

 RBI Guidelines for protection of Cardholder / Consumer .

 Limit of Liability of Rs 25000
 Within 7 workings Days reporting .
 The Banks has to resolve the issue within 90 days .

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 CREDIT CARD FRAUDS – CONCLUSION

 “The prevention is better than Cure”

 As Quoted above , all the stake holders of credit card should
exercise the utmost care about the card information , identity
detail, other required technological support to prevent the
fraud.
 The cost of prevention might be less compared the actual
frauds which are taking place in and around the world .
 The Banking association and The Reserve bank of Indian
should be monitored and framed the rules as per the dynamics
of the environment and encourage the new methods and system
which will be user friendly process with high security controls .

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 CREDIR CARD FRAUDS

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