Globally, ATM skimming fraud is a $2 billion problem. This is a rapidly-growing issue that’s become a major pain point for banks and credit unions already faced with increased challenges on how to manage their fraud-fighting measures.
Another problem? ATM skimmers are easy to buy online. What used to be something that was only accessible on the dark web can just as easily be bought on a marketplace today. Bottom line? If fraudsters want a skimmer, they can get their hands on one.
ATM fraud continues to rise at alarming rates. Compromises from ATMs and POS devices rose 21 percent in the first half of 2017, when compared to 2016’s same figures, according to FICO. Compromised cards rose by 39 percent. Keep in mind these figures don’t account for holiday card fraud — a time which banks and credit unions should expect to see a spike.
In 2016, the amount of debit cards compromised at ATMs rose 70 percent. That’s on top of the already massive 546% increase seen in 2016. Clearly, this problem isn't going away.
So what’s contributing to an uptick in fraud seen at ATMs? The simple answer to this question is that fraudsters are getting smarter, their techniques are getting more sophisticated and technology is evolving.
As quickly as financial institutions invest in better technology to thwart of fraudsters, those same fraudsters have moved on to the next big hacking technique. This has been especially true with ATM skimming. But no matter how smart ATMs get, the rate of which debit cards are getting compromised at both ATMs and store terminals is rising at unprecedented rates each year.
The real answer about why ATM fraud is getting worse deserves a little more attention.
What’s Contributing to the Rise in ATM Fraud: A Deeper Dive
Not only are fraudsters’ techniques getting smarter, their devices are too. Skimmers used to be clunky and easy to spot from the outside. Now, however, the ATM skimming fraudsters have upped their game with slimmer devices that are inserted further into machines — making them harder to detect.
Another major problem? Fraudsters no longer need to get the skimmer back to gain the payment credentials stolen from cards inserted in the device. SIM cards used in cell phone and bluetooth technology have made it even easier for hackers to commit massive amounts of fraud in shorter amounts of time. The latest trend is targeting high balance accounts and withdrawing large sums in a short time span.
"Skimming has historically been the number one fraud issue for the ATM channel, so it's always been, on top of mind for our folks. The financial institutions generally do quite a bit in the way of countermeasures for skimming," David Tente, executive director in the U.S. for ATMIA, the ATM industry trade group, told CNBC.
Still, the problem persists at alarming rates.
Another challenge? Fraudsters have created ATM skimming devices designed to look like ATM skimming detectors. This has made it even hard to tackle this problem from a hardware perspective.
ATM manufactures are working on improving their devices, including changing the way cards are inserted to prevent skimmers from being used. Still, that isn’t enough to combat a problem this rampant with such vast financial implications.
How Machine Learning and Automated Fraud Detection Solutions Can Help
Banks typically have less than 48 hours after an ATM compromise before money is out the door. Banks need to quickly identify compromised ATMs and cards to get a handle on the scope of the problem — a process that can take weeks.
Relying on these types of alerts aren’t fast enough to keep up with the speed at which fraudsters move today. The only way to keep up with the trends employed by fraudsters that have created this $2 billion ATM fraud problem? Leverage machine learning tools and sophisticated data analytics techniques to get ahead of the problems before they spread. Being reactive, instead of proactive, in today’s fraud-filled world will always leave financial institutions playing catch up with the fraudsters.
Weeks won’t cut it when the result of a compromised card means lost revenue, customer churn and brand reputation. What banks and credit unions really need is the ability to be alerted quickly if an ATM skimmer is in place. This is where the physical boundaries of ATM anti-skimming devices have their limits.
To proactively combat this problem, Rippleshot’s platform brings the latest in fraud detection technology to detect compromised merchants and ATMs in order to identify issuer’s at-risk cards. From there, our team of team of data scientists uses the power of machine learning to assesses each card’s total exposure from all breached locations to determine the probability that a card will become fraudulent.
Relying on machine learning and advanced analytics is the only way to detect skimmers faster and more effectively. In fact, with Sonar ATM Fraud Detect, banks and credit unions can get automated actionable reports on potentially compromised ATMs and cards to strategically manage card reissuance and determine which PINs and/or cards may need to be canceled in just two hours.
The end result? Faster ATM fraud detection, and the knowledge to help fraud teams take action faster on the affected cards — reducing fraud losses and client impact.