Credit and Debit Card Ratings

Prepaid Card Fraud Controllable

A recent report by Mercator Advisory Group examines the vulnerability of prepaid debit cards to criminals,

by Chris Warren

Prepaid debit cards make it into the news a lot these days. A lot of the time stories are focused on the maneuvering of large financial services companies like Chase and American Express and the various strategies they’re implementing to grab a larger chunk of this ever-growing market.

But there has also been a steady stream of news recently about fraud involving prepaid debit cards. For instance, in mid-November six Yonkers, New York residents were arrested and charged with hacking into bank financial systems and swiping prepaid debit card information that enabled them to steal $45 million. There have also been frequent reports of criminals posing as utility workers, who threaten victims with shutting off their power unless they put money on a prepaid debit card.

While the use of prepaid debit cards by criminals is gaining notoriety, the scope of the overall problem may not be so dire. Indeed, according to a recent report by Mercator Advisory Group, a consulting company, fraud involving prepaid debit cards is much smaller than what takes place with debit cards. The report, “Prepaid Card Fraud and Risk Controls in the United States,” notes that criminals target credit, debit and prepaid cards alike simply because they all have some level of weakness that can be exploited.

In addition, Ben Jackson, the report’s co-author and a senior analyst at Mercator’s Prepaid Advisory Service, insists that further regulation of the industry isn’t necessary. “Prepaid fraud is a serious, but manageable problem, as long as the members of the prepaid value chain work together. There is nothing inherent to prepaid that makes it more or less risky than other financial products,” he says.

Furthermore, Jackson outlines a variety of best practices that can be implemented to thwart criminals. For instance, the report says that card issuers and retailers should not be hesitant to say “no” to customers who raise red flags. In addition, the report encourages companies and banks to ask for additional documentation in situations when they feel it’s warranted and also to create a list of problematic names, addresses and phone numbers.

Tag: prepaid card

  • Prepaid Card Fraud Controllable

    Prepaid Card Fraud Controllable

    A recent report by Mercator Advisory Group examines the vulnerability of prepaid debit cards to criminals,

    by Chris Warren

    Prepaid debit cards make it into the news a lot these days. A lot of the time stories are focused on the maneuvering of large financial services companies like Chase and American Express and the various strategies they’re implementing to grab a larger chunk of this ever-growing market.

    But there has also been a steady stream of news recently about fraud involving prepaid debit cards. For instance, in mid-November six Yonkers, New York residents were arrested and charged with hacking into bank financial systems and swiping prepaid debit card information that enabled them to steal $45 million. There have also been frequent reports of criminals posing as utility workers, who threaten victims with shutting off their power unless they put money on a prepaid debit card.

    While the use of prepaid debit cards by criminals is gaining notoriety, the scope of the overall problem may not be so dire. Indeed, according to a recent report by Mercator Advisory Group, a consulting company, fraud involving prepaid debit cards is much smaller than what takes place with debit cards. The report, “Prepaid Card Fraud and Risk Controls in the United States,” notes that criminals target credit, debit and prepaid cards alike simply because they all have some level of weakness that can be exploited.

    In addition, Ben Jackson, the report’s co-author and a senior analyst at Mercator’s Prepaid Advisory Service, insists that further regulation of the industry isn’t necessary. “Prepaid fraud is a serious, but manageable problem, as long as the members of the prepaid value chain work together. There is nothing inherent to prepaid that makes it more or less risky than other financial products,” he says.

    Furthermore, Jackson outlines a variety of best practices that can be implemented to thwart criminals. For instance, the report says that card issuers and retailers should not be hesitant to say “no” to customers who raise red flags. In addition, the report encourages companies and banks to ask for additional documentation in situations when they feel it’s warranted and also to create a list of problematic names, addresses and phone numbers.

  • The Occupy Card Moves Ahead

    The Occupy Card Moves Ahead

    The Occupy Money Cooperative needs to raise $900,000 to make its card a reality.

    by Chris Warren

    The Occupy Wall Street Movement’s first steps into the financial services industry have not been particularly smooth. The announcement this past summer that the Occupy Money Cooperative, an offshoot of the anti-status quo coalition that grabbed the world’s attention with its street protests and barbed criticism of banks in the fall of 2011, would attempt to issue a prepaid debit card was an immediate source of fascination.

    Yet when the proposed fees associated with the Occupy Card were unveiled in September, an avalanche of criticism quickly followed. Far from being hailed as a savior riding to the rescue of helpless citizens being preyed upon by the big banks, respected observers like Consumer Reports declared that the card’s fees were worse than many other products already on the market. “Our first look at those proposed fees shows that the Occupy Card needs some work if its sponsors truly want it to be superior to other prepaid cards,” declared the Consumer Reports review.

    Nevertheless, the supporters of the Occupy Money Cooperative appear just as determined as ever to not only launch its prepaid debit card but to revolutionize the banking system. According to an article in the Cornell Daily Sun, the student newspaper at Ithaca, New York’s Cornell University, university professor Robert Hockett is among those working to make the card a reality.

    According to the article by reporter, Helen Donnelly, the Occupy Card will be launched once Hockett and the other co-founders of the Occupy Money Cooperative can raise $900,000 in initial operating capital. The article does not say how close, or far, the group is from reaching that amount.

    Despite its bumpy rollout, Cornell’s Hockett insists that Occupy’s ambitions are still to go well beyond just a prepaid debit card. “The Occupy Money Cooperative is beginning with the debit card. This debit card is a specific counterpart to cards like these that exist in existing banking institutions already offered. Chase Liquid is probably the best-known example,” Hockett told the newspaper. “The ultimate plan is to offer all the other services that these existing banking institutions already do, but on a non-profit basis.”

     

Credit and Debit Card Ratings