By Brad Fauss, NBPCA
The Identity Theft Resource Center estimates there have been 858 data breaches so far this year, exposing nearly 30 million records. This is a nearly 10 percent increase from the total number of breaches in 2015—and there are still several weeks left in the year. Further adding fuel to the fire, malware attempts are up 36 percent and overall security incidents have jumped by 38 percent. When consumers’ private information is compromised, they are more vulnerable to identity theft and more at risk for fraud.
Anyone who has fallen victim to fraud can attest that it can take considerable time, money and resources to help recover from the damage criminals can cause. This is why the prepaid industry, as well as other financial services providers, make it a priority not only to comply with federal regulations, but to go beyond those mandates to put in place further safeguards that consumers deserve. We are committed to providing our customers with the safest experience possible in order to ward off potential headaches down the line.
Under federal law, prepaid providers must have a system in place to monitor and shut down fraud. This includes investigating the identities of those who try to open accounts and implementing a written identity theft prevention program to detect the “red flags” of identity theft in their day-to-day operations, as well as taking steps to prevent the crime and mitigate its damage. While the process can be time-consuming, it’s necessary to hinder identity theft, money laundering, terrorist financing, and other types of fraudulent or illegal activity that unfortunately can occur. In the U.S., card issuers lost $11 billion last year due to fraud and, while prepaid cards are only a small percentage of the total number—just 4 percent in 2015, the industry continues its diligence to keep that number from growing.
We have a responsibility not just to comply with the law, but to protect the millions of cardholders who rely on prepaid cards as an affordable, secure way to access and store their funds. Because of this, the industry does not stop at compliance, but works to identify and implement new and innovative ways to keep customers safe.
Collaboration across industries and with local, state and federal governments plays a big part in staying ahead of fraud. The Network Branded Prepaid Card Association (NBPCA) and its members track fraud trends and take action to combat criminal activity. Our association has two working groups dedicated to fighting fraud. The Financial Crimes Task Force works collaboratively with legislators, regulators and law enforcement to educate these groups about the prepaid card industry infrastructure, payment flows and product attributes and also shares information about ways that various fraud schemes impact the prepaid card market. Additionally, the Law Enforcement Alliance for Prepaid (LEAP) works collaboratively with the National Cyber Forensics Training Alliance and their embedded law enforcement members to share information about new fraud schemes and ways to combat fraud.
NBPCA also actively participates in the IRS Security Summit, a partnership between the IRS, state revenue or taxation departments, and other industry stakeholders. The summit meets on a regular basis to identify and mitigate weaknesses in the tax filing and refund disbursement process, ultimately working toward combating identity theft tax refund fraud. Although only in its second year, this collaboration already has led to a noticeable decrease in fraudulent prepaid card loads during the 2016 tax filing season. In fact, according to the IRS, there has been a nearly 50 percent drop in fraudulent returns, and there has been significant progress in stopping fraudulent returns before refunds are ever paid, due in part to new information provided by industry and state partners.
Although the threat of cyberattacks revealing sensitive consumer information is increasing, the prepaid industry remains as committed as ever to warding off attempts to harm consumers. Cardholders know they can count on their prepaid providers to offer a safe, convenient and affordable product to meet their needs. This includes going through the necessary steps to verify account holder identities, monitor accounts and block fraudulent activity. The prepaid industry continues to put its customers first and will continue to do so in 2017 and beyond.
Brad Fauss is president and CEO of the Network Branded Prepaid Card Association (NBPCA), a nonprofit trade organization committed to responsibly advancing the success of the prepaid card industry. He can be reached at email@example.com.
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