How can FIs protect themselves from card skimming risks?

Card skimming continues to be a major problem for financial institutions (FIs) and consumers. Despite advances in technology, criminals still find innovate new ways to circumnavigate security measures and exploit the magnetic stripes on cards.

Statistics from ATM Marketplace revealed that one-third of all fraud events are connected with skimming. Furthermore, global ATMs lose more than $2 billion a year due to this crime, meaning organizations need a comprehensive strategy if they want to prevent losses.

But what can FIs do to stop tech-savvy criminals from gaining access to consumer card details? Well, there are plenty of approaches available to strengthen skimming protection capabilities. Here are some of the most common options.

1. Deploy anti-skimming technology 

Most skimming attacks target ATMs, although any location that accepts payments with a card that has a magnetic stripe could fall victim to this type of fraud. Nevertheless, anti-skimming technologies must offer FIs the ability to detect when a skimmer is being used in a card reader, regardless of how small the device.

These features should be supplemented with jamming technology, which produces multiple random signals that stop criminals from isolating and recording the data on magnetic stripes. The best anti-skimming solutions also have built-in diagnostics and state-of-health functions, enabling FIs to monitor the status of the device to see whether it’s functioning appropriately.

2. Switch to EMVs and contactless 

Longer-term skimming protection will come from the gradual movement to EMV and contactless cards, as paying with these cards is more secure than magnetic stripe technology. EMV uses a chip that encrypts personal data, which generates a unique code for each transaction and prevents any stolen information from being useful.

Some EMV cards also work with near-field communications readers, so that users can simply tap their card onto the device to confirm a payment. While these cards are popular in Europe, adoption has been slower across the US. However, skimming losses are likely to fall as these technologies become more commonplace.

3. Install additional physical protection 

Criminals often try to cut into the ATM in order to fit skimming devices, so providing more protection for the machine’s fascia can act as a deterrent. Physical attacks appear to be on the rise, at least in Europe, where research recently revealed a 34 per cent jump in incidences between 2014 and 2015.

In fact, FIs saw their financial losses to attacks climb 81 per cent overall to €49 million ($54.5 million) last year. Most of these events were direct robberies rather than skimming efforts, but the figures show the potential vulnerabilities that ATMs can possess if they aren’t sturdy enough.

4. Educate consumers

FIs can invest in the right technology, strengthen their anti-skimming protection measures and benefit from the latest developments in cards. But one of the best ways to reduce fraud is to ensure customers are well informed.

Skimming devices can be incredibly difficult to spot; however, there are potential signs of tampering that people might notice. For example, anything that looks odd with the external interface or doesn’t seem to be part of the original design could indicate criminals have installed a skimming device or camera. Individuals should also always shield their hand when entering PINs and watch out for people who may be lingering nearby. This recent piece on ConsumerReports.org discusses how to look out for skimmers at the ATM.

Ultimately, building a sophisticated strategy for reducing card skimming requires a combination of different elements. With the right approach, FIs can not only lower their financial losses but also improve customer satisfaction and trust.

Written by Dena Hamilton

Dena Hamilton

Dena is NCR’s Director of Enterprise Fraud & Security Software Solutions. She specializes in fraud, risk, compliance and security, with over 35 years of experience in the financial services space. Her focus is the development and deployment of enterprise financial crime solutions optimized in prevention, detection and back office efficiency.

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