BSG Clearing Solutions, which makes transaction processing and credit card gateway solutions and services, announced Feb. 12 that it is deploying the value-added Card Identification System to help card-not-present online retailers detect prepaid and gift card fraud.
“We look at the transaction, all its history and data elements,” said David Guerin, BSG’s vice president of operations. “We detect suspicious purchase patterns and flag transactions that are indicative of fraudulent purchase behavior so merchants can stop fraudulent purchases as they are occurring.”
Guerin said that with the growing legitimate use of prepaid cards has come an increase in attempts to use them for illegitimate purposes.
“Fraudsters are using prepaid cards to perpetuate fraud or set up more advanced fraud schemes,” he said. “It’s the nature of the beast. Prepaid cards are very much anonymous. You can buy one at a convenience store, charge it up and start making purchases.”
Guerin said that the expanded risk management capabilities of BSG’s hosted Card Identification System allow card-not-present retailers to detect additional data such as what kind of card is being used-such as a credit or debit card-and its precise usage, such as platinum or rewards.
“This makes risk management smarter and stronger,” he said.
Guerin said the Card Identification System is a transaction-based solution and that BSG analyzes a retailer’s specific customer behavior patterns to detect the signals of fraudulent purchase behavior and provide instant alerts when it occurs. He said that retailers can also use this analysis for marketing purposes.
“We talk about revenue optimization and empowering our customers to make better decisions,” he said. “In the process, it’s inevitable we will run across some marketing data as well.”
Commenting on the fraudulent use of prepaid cards in general, Brian Riley, an analyst with TowerGroup, said card-not-present fraud is increasing in every region worldwide.
“Prepaid cards are especially vulnerable to fraud because of their anonymous nature and more significant risk controls are needed,” Riley said. “You cannot easily tie one back to a user who may have [a suspicious transaction history].”
Riley said one major form of card-not-present fraud is return fraud, where a perpetrator makes an in-store return, puts the credit on a prepaid card and then resells it online as an unused card.
In addition, Riley said fraudsters are starting to compromise the MICR information on the back of prepaid cards and are replacing it with phony or stolen credit card information.
“The stripe on the back of a dead gift card is being reprogrammed,” he said. “It impacts another payment form.”
BSG is offering the Card Identification System as a hosted ASP solution that can be modified according to a specific systems model, business strategy and product line. The Card Identification System is a module of the vendor’s Advanced Payment Gateway payment application.