What Is Card Testing Fraud?
Card testing fraud is when criminals use stolen or fake credit card numbers to make small purchases online. They do this to check if the card details are valid and active. If the small transaction goes through, they know they can use the card for bigger, unauthorized purchases later on.
Here's how it works in simple terms:
Criminals get credit card details by stealing them or buying them illegally.
They make a small online purchase, like buying something for $1.
If the transaction is successful, it confirms the card is active and can be misused.
The main goal is to verify the card works without raising immediate suspicion. Once they know the card is valid, they might make large purchases, withdraw cash, or sell the card information to others.
How Does Card Testing Work?
Understanding the steps criminals take can help you spot and prevent card testing fraud. Here's what they typically do:
Getting Card Information
Stealing Data: Criminals hack into databases or use devices to copy card numbers from ATMs or gas pumps.
Phishing Scams: They trick people into giving their card details through fake emails or websites that look real.
Buying from Illegal Sources: Stolen card information is bought and sold on the dark web.
Testing the Cards with Small Purchases
Making Tiny Transactions: They use the stolen card details to make small online purchases, often under $5, to avoid detection.
Using Bots to Speed Up Testing: They employ software programs to test many card numbers quickly without manual effort.
Checking the Results
Successful Transactions: If the small purchase goes through, it shows the card is active. The criminal marks it for larger fraud.
Failed Transactions: If the transaction is declined, they discard the card information and move on.
Carrying Out Bigger Fraudulent Activities
Making Large Unauthorized Purchases: Using the valid cards to buy expensive items like electronics or gift cards that can be resold.
Withdrawing Cash: If possible, taking out cash advances from the card.
Selling Validated Card Details: Selling the confirmed card information to other criminals.
By following these steps, criminals exploit active credit cards before the unauthorized activity is noticed by the cardholder or the bank. Using bots makes this process fast and efficient, allowing them to test many cards in a short time.
Why Is Card Testing a Concern for Businesses?
Card testing fraud can significantly impact businesses in several ways:
Financial Impact
Chargebacks and Refund Costs
- Required to refund disputed transactions to cardholders.
- Incur additional chargeback fees from payment processors.
- Increased Transaction Fees
- Labelled as a high-risk merchant due to fraud history.
- Face higher transaction fees and stricter processing terms.
- Potential Loss of Payment Processing Services
- Risk of payment processors terminating services.
- Difficulty finding new processors, possibly with higher costs.
Reputational Damage and Loss of Customer Trust
- Erosion of Customer Confidence
- Customers may doubt the security of their personal and financial information.
- Negative Publicity
- Bad reviews and social media posts can deter potential customers.
- Long-Term Sales Impact
- Loss of customer loyalty can decrease sales over time.
Legal and Compliance Risks
- Violation of Data Protection Laws
- Non-compliance with standards like PCI DSS can lead to fines.
- Liability for Data Breaches
- Legal responsibility for inadequate security measures.
- Regulatory Scrutiny
- Subject to audits and increased compliance requirements.
What Are the Signs of a Card Testing Attack?
Spotting card testing fraud early is crucial to protect your business from potential losses. Here are some common red flags to watch out for:
Unusual Patterns of Small Transactions
If you notice a sudden increase in small purchases, often under $5, it could be a sign of card testing. Fraudsters make these tiny transactions to check if stolen card details are active without drawing attention. Multiple small transactions happening within a short time frame are particularly suspicious.
Multiple Declines or Failed Authorization Attempts
A high number of declined transactions or failed payment attempts can indicate that someone is testing card numbers to find valid ones. Fraudsters may repeatedly try different card details, guessing expiration dates or security codes until they succeed.
Rapid Succession of Transactions from the Same IP Address
Seeing numerous transactions coming from the same IP address in quick succession is another warning sign. This pattern suggests the use of bots or automated scripts to test large volumes of card numbers rapidly.
Transactions from Unexpected Geographic Locations
Transactions originating from countries or regions where you don't usually have customers may signal fraudulent activity. Fraudsters often use proxy servers or VPNs to mask their true location. Also, be cautious of transactions where the billing and shipping addresses don't match or seem illogical.
How Do Bots Amplify Card Testing Fraud?
Bots play a crucial role in making card testing fraud more effective and widespread. Here's how they amplify these attacks:
Automated Testing on a Massive Scale
Speed and Volume
- Bots can test thousands of credit card numbers in a short amount of time.
- Automation allows fraudsters to quickly identify which cards are valid without manual effort.
Evasion of Detection
Distributed IP Addresses
Bots often operate through networks of infected devices called botnets.
By using multiple IP addresses from different locations, they make it hard for security systems to detect and block suspicious activity.
Mimicking Human Behavior
Advanced bots can imitate how real users interact with websites.
They simulate mouse movements, clicks, and typing patterns to avoid detection by basic security measures.
Why This Matters
The use of bots significantly increases the risk of card testing fraud for businesses. Bots enable fraudsters to find and exploit more valid cards, leading to greater potential financial losses. Traditional security tools may not be sufficient to stop these sophisticated bot attacks. Understanding how bots amplify card testing fraud highlights the need for advanced security solutions that can effectively detect and block automated attacks.
How Can Businesses Mitigate the Risks of Card Testing?
Businesses can take proactive steps to protect themselves from card testing fraud:
Implement Strong Customer Authentication
Use methods like two-factor authentication (2FA) or multi-factor authentication (MFA) to verify customer identities.
This adds an extra layer of security, making it harder for fraudsters to use stolen card details.
Use Rate Limiting
Set limits on the number of transactions or requests allowed from a single IP address within a specific time frame.
This helps prevent bots from making rapid, successive transaction attempts.
Employ Address Verification Service (AVS) and CVV Verification
Require customers to provide their billing address and the card's CVV (the three-digit code on the back of the card).
Verifying this information ensures the person making the transaction possesses the physical card.
Monitor Transactions in Real-Time
Use real-time monitoring tools to detect suspicious activities promptly.
Look for unusual patterns like sudden spikes in small transactions or multiple declined attempts.
Set Minimum Payment Thresholds
Establish a minimum transaction amount to deter fraudsters who typically make very small purchases to test card validity.
This makes it less feasible for them to use your platform for card testing.
What Technologies Help Prevent Card Testing Fraud?
Utilizing advanced technologies is essential in the fight against card testing fraud. These tools can help businesses detect suspicious activities, analyze user behavior, and prevent fraudulent transactions more effectively. Here are some key technologies that can make a significant difference:
Machine Learning and AI
Detect anomalies by analyzing large datasets to identify unusual patterns that deviate from normal behavior.
Behavioral Analytics
Understand normal user behavior to spot irregular activities that may indicate fraud attempts.
Device Fingerprinting
Identify suspicious devices by collecting and examining unique device information and configurations.
IP Geolocation Checks
Verify transaction locations to detect discrepancies between the user's claimed location and their actual IP address.
Why Aren't Traditional CAPTCHAs Effective Against Advanced Bots?
Traditional CAPTCHAs are less effective against advanced bots because:
Limitations of Legacy CAPTCHA Systems: They use simple tasks like reading distorted text or selecting images, which are now easy for bots to solve using machine learning.
Sophisticated Bots Can Solve or Bypass Them: Advanced bots leverage AI to recognize patterns and complete CAPTCHAs accurately, or they use CAPTCHA-solving services.
Need for More Advanced Bot Management Solutions: Because traditional CAPTCHAs can't keep up with evolving bot technologies, businesses require smarter security measures that adapt to new bot tactics and effectively distinguish between humans and bots.
What Should You Do If You Detect a Card Testing Attempt?
If you detect a card testing attempt, take immediate action by following these steps:
Isolate and Block Suspicious Activity
Identify and block the IP addresses, accounts, or devices involved in the suspicious activity.
Implement security measures to prevent further unauthorized attempts.
Notify Relevant Parties
Inform your payment processors and financial institutions about the fraudulent activity.
Notify affected customers so they can monitor their accounts for any unauthorized transactions.
Review and Strengthen Security Measures
Assess your current security protocols to identify any vulnerabilities.
Update and enhance your defenses to prevent future attacks, such as implementing advanced bot management solutions.
How Can Arkose Labs Help You Combat Card Testing Fraud?
Arkose Labs is a leader in fraud detection and bot detection and mitigation. We offer an advanced solution, Arkose Bot Manager, that detects and stops card testing attacks, protecting your business and customers while ensuring a seamless user experience.
Request a demo to see how Arkose Bot Manager can secure your platform.