Credit Card Fraud Statistics and Facts - Term Paper Example

Running head: Credit card and Biometrics Credit Card Fraud Prevention via Biometrics Executive Summary Credit cards are widely used all over the world for money transactions. It is used for purchasing goods, services or to take money from the Automatic Teller machines. The increasing influence of internet and the advancements in technology has paved way for payments through credit cards. At the same time misuse of technology resulted in credit card forgery like cyber crimes which created doubts in the minds of the public about the reliability of using credit cards. Biometrics provides the answers to all types of credit card forgery. The individual characteristics, which are unique from person to person has been made use in biometric technology. Physical characteristics such as face, finger prints and behavioural characteristics such as voice, body movements (Eye movements) etc are used extensively in biometrics to identify a person. The credit card provider take note of either one of the biometric characteristics mentioned above for making and storing biometric template in the master computer at the time of issuing the card. The card holder needs to scan the particular biometric characteristics against a scanning system whenever he was planning to use the credit card for some services. Biometrics increases the safety, security and reliability of the credit card system. Moreover it is inexpensive, fast and easy to use as well. The major disadvantage of biometrics is the loss of privacy. Considering the improvements in electronic transactions, it is necessary to increase the safety of the credit card transactions and the use of biometrics in credit card services seems to be the option for the future. Purpose of the report "A credit card is a thin plastic card, usually 3-1/8 inches by 2-1/8 inches in size, that contains identification information such as a signature or picture, and authorizes the person named on it to charge purchases or services to his account -- charges for which he will be billed periodically. Today, the information on the card is read by automated teller machines (ATMs), store readers, and bank and Internet computers" (How Credit Cards Work, 2008).Credits cards are a type of plastic card with a magnetic strip which is used extensively to borrow money or to buy products or services. The card holder need not carry money always with him for his purchasing needs. He can use the credit cards to purchase an object directly or indirectly through internet from anywhere in the world. Each credit card may have the name of the card holder affixed and a unique number. Moreover, a personal identification number (PIN) is also provided by the financial institution which supplies the credit card to its customers. This PIN would be useful for the card holder when he want to withdraw money from Automatic Teller Machines (ATM). Problem "In the end of 2005, MasterCard and Visa generated a sales volume of more than $190.6 billion, from the circulation of approximately 56.4 million credit cards across Canada. Credit card fraud statistics show that about $2.8 million was lost due to credit card fraud, from fraudulent use of MasterCard and Visa alone. In total, credit card fraud costs cardholders and credit card issuers as much as $500 million a year" (Credit Card Fraud Statistics and Facts, 2009) Credit card forgery is one of the big headaches faced by the cyber crime investigating agencies. The big problem associated with credit card is that anybody who knows the card number can use it. Even though many security measures provided by the card supplier for the customers, forgers have better technologies to steal the credit card numbers while the card holder using it somewhere for his purchasing needs or money withdrawal purposes. Biometrics is a new technology incorporated to credit card uses to prevent the card forgery. Instead of the card number, in biometrics oriented credit cards, the finger print, voice or the face of the card holder is scanned by the machine so that the forgery can be avoided. This paper briefly explains the credit card forgery and the importance of biometrics in preventing it. Biometrics in credit cards Biometrics is a method of identifying people using their physical traits such as fingerprints or face and behavioural traits such as typing rhythm, voice or body movements like the eye movements. Each person is unique in appearance and behaviour. In other words, no two individuals are alike physically and also behaviourally. Biometrics makes use of this great principle to identify each person. For example, the fingerprints of all the humans existing in the world are different. Even the siblings have different finger prints. Same way, the behavioural traits are also different for different persons. "There are a wide variety of biometrics, all of which are unrelated. Voice recognition, fingerprints, face recognition, hand geometry, etc. The technology for one of these has nothing to do with the technology for any of the others" (Callas, 2009) Biometrics binds the credit card to the cardholder by storing a biometric signature within the card (Murray and Park, n.d, p.14). Signature was the conventional method used for identifying the card holder earlier which is to forge. On the other hand with the introduction of biometrics in credit cards, instead of signature, finger print, face or voices used in the modern credit cards with biometrics facility. It is difficult for the card forger to forge the finger print, face or voice of the card holder. Finger print can individualize the card holders and it can be used universally as well. It is cheap and reliable also. Voice on the other hand functions remotely. Voice of the card holder is enrolled at the time when the card issued by the authority. Card can be equipped with voice sensor, so that it can send authentication signal when it verifies user's voice. It is good for online shopping (Murray and Park, n. d, p.16). It is not necessary to mention that the face cannot be forged. Even better artists cannot draw the picture of a person perfectly as a photograph. The mechanism of biometrics in credit cards can be studied using the following diagram. (Biometrics, 2009) The template with the biometrical identification entity is stored in the master computer. When the card holder approaches the sensor of the biometric identification system it scans the specified biometric entity and compare it with the stored template. If the master computer recognizes the card holder, it will send a matching signal to the machine which scanned the biometrics of the person. If such a matching instruction receives from the master computer the biometric system allows the person for further transaction using the card. For example, consider the master computer has stored the finger print of the card holder. When the card holder scans his finger against the sensor, the sensor sends the electronic signals of the finger print to the master computer consisting of the stored finger print of the card holder. If both the scanned and stored finger prints are matching the master computer sends the green signal to proceed. Advantages and disadvantages of using Biometrics in credit cards "The beauty of a biometric trait is that it is as unique as the individual from whom it was created. Unlike a password or PIN, a biometric trait cannot be lost, stolen, or recreated. Joel Lisker, senior vice-president of security and risk management with Mastercard, has said the so-called smart credit card, incorporating finger verification, could eliminate 80% of fraudulent charges" (O'Sullivan, 1997). The major advantages of using biometrics in credit cards are the; Increased security, Faster and easier transactions for the customer and the retailer, Higher throughput of individuals and thus more transactions per day, Eliminates the need to carry a ID or membership cards, Cut the average costs associated with transaction fees(Murray and Park, n. d, p.26). The major disadvantages are; Loss of privacy (Biometric traits), Could be circumvented by fake biometrics (e.g., fingerprint spoofing, however cloning a card number is still much easier than spoofing a biometric system), Attack on database, Authentication software updates (change would have to be applied to all authentication devices), avoiding the carry of additional cards for the compatibility (Murray and Park, n. d, p.27) Conclusions Biometrics is working on the principle that two individuals are not alike either physically or behaviourally. Biometrics use in credit cards will definitely increase the safety and security of credit card transactions. Credit card forgers are smart enough to forge the credit card numbers or the signatures whereas it is difficult for them to forge the biometrics of a person. Not only physical characteristics, even behavioural patterns of a person can be used as the identification marks for a particular person in biometrics used credit cards. Considering the wide popularity and increased amount of forgery, it is necessary that all the conventional credit cards using signature or identification numbers should be replaced by biometrics oriented cards. References 1. Biometrics, (2009), retrieved on 23 November 2009 from http://en.wikipedia.org/wiki/Biometrics 2. Credit Card Fraud Statistics and Facts(2009), retrieved on 23 November 2009 from http://www.spamlaws.com/credit-fraud-stats.html 3. Callas Jonathan (2009), Biometrics and credit card security, retrieved on 23 November 2009 from http://searchsecurity.techtarget.com/expert/KnowledgebaseAnswer/0,289625,sid14_gci770615,00.html 4. How Credit Cards Work, (2008) retrieved on 23 November 2009 from http://money.howstuffworks.com/personal-finance/debt-management/credit-card.htm 5. Murray Lindsey and Park Unsang (n.d), retrieved on 23 November 2009 from http://faculty.ksu.edu.sa/ALFURAIH/Credit%20Card%20Fraud/BiometricsCreditCards.pdf 6. O'Sullivan Oria, (1997), retrieved on 23 November 2009 from http://www.banking.com/aba/cover_0197.htm Read More