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3 irrefutable reasons why ISOs must up their game against fraud
March 12, 2014 by atm Atom — blogger, atmatom
Heartland, Target, Neiman Marcus; Congressional hearings, NRF vs. banks; liability shift deadlines, PCI, processing AIDs – it's enough to make your head spin. Largely missing from the conversation, however, has been the ATM ISO.
To date, widespread fraud and breaches have been largely confined to database hacks and the release of customer credit and debit card information. The fact that ATMs might be used as the "last mile" for criminals to turn stolen account information into cash has not yet translated into heavy ISO financial losses — or conviction in the court of public opinion.
That might be about to change, though, and it would behoove U.S. ISOs to follow the NRF's lead, going on offense to combat fraud rather than playing defense down the road. This is true for these reasons, among others:
1) Washington is notoriously unpredictable
Representative Dan Maffei has called breaches at Target and elsewhere "a national security concern." Constituents continue to howl as accounts are hacked and losses take time to recover.
While gridlock continues to rule Washington on the larger issues, Congress and the White House have never hesitated to intervene where there is widespread "consumer harm," particularly when the perception is that Big Banks are to blame.
The white label ATM industry risks being caught in the crosshairs as Congress considers "responsible party pays" legislation. U.S. ISOs should get ahead of the oncoming train and formulate a well-publicized plan to secure their portion of the payments infrastructure before one is rammed down their throats.
2) Breach losses continue to mount
Current estimates of $1 billion in annual credit and debit card fraud are predicted to triple in the next two to three years as criminals flock to U.S. magnetic stripe heaven and its Swiss-cheese defense.
The days of data or physical breach losses measured in the thousands of dollars are over. Losses today are measured in the hundreds of thousands and even millions of dollars.
VISA and MasterCard have shown no signs of backing down on plans to pass these costs to the "weakest link in the payment chain."
Compared to the payment schemes, sponsor banks and even the processors, most ISOs are ill equipped to absorb even one seven-figure loss. U.S. ISOs who don't have concrete plans to avoid being the donkey in the liability "pin the tail" game risk annihilation.
3) Physical breaches are increasing
With all eyes focused on PCI, EMV and the liability shift, the increase in physical attacks against ATMs and gas pumps has thus far flown below the radar.
In the last year, a number of physical attacks have employed Bluetooth devices and cameras installed on both gas pumps and ATMs, resulting in a rich bounty of card numbers, PINs and even cash from unsuspecting customers and ISOs.
In some cases, these harvest operations have gone undetected for a year or more. Losses on these little-publicized attacks have reached the millions, exposing ISOs of all sizes to the potential for painful losses.
U.S. ISOs must remain vigilant, upgrading ATMs with the latest hardware and software security and physically inspecting units on a regular basis in response to the growth in physical attacks.
There is little doubt that cumulative risks to the U.S. white-label ATM industry over the next few years will be unprecedented. What is becoming clearer is that there almost certainly will be carnage among the "wait and see" crowd.
Whether it is already too late for U.S. ISOs to respond effectively is still subject to debate.
This article has been republished from the Triton blog, atmAToM, with kind permission from Triton.
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