Modern technology has amplified the allure of instant gratification. Most aspects of the modern economy are instant. Consumers have decreasing interest in locking into long term contracts or committing to a singular company for monthly service. As a result, prepaid consumers are on the rise across all industries. The prepaid market opens up new and interesting possibilities for both consumers who want services and enterprises that provide services. With its benefits, the rise in the prepaid consumer base also opens up new risks of payment fraud. Here is a quick breakdown of the rise in prepaid options and the risks that go along with it.
Why Prepaid Consumers Are Growing in Number
More and more consumers are investing in prepaid options for many of their financial decisions. Prepaid cards give a consumer the ability to receive paychecks and make payments with the illusion of having an actual credit card from a financial institution. Prepaid cards and gift cards are often backed by the same companies that supply actual credit cards and debit cards. Consumers who may not have access to credit cards under normal circumstances can still use prepaid cards to make purchases in person, over the phone or online.
Why Hackers Are Targeting Prepaid Cards
Prepaid cards often don’t have the same level of fraud protection that credit cards and debit cards offer. Prepaid cards backed by larger banks may appear to have the same level of protection without actually having it. Prepaid cards are relatively similar to cash. The money that is loaded onto them can disappear in the same way that a $20 bill can vanish from a wallet without a trace. The Federal Trade Commission reports close to 85,000 complaints involving prepaid fraud annually. The losses resulting from that fraud total close to $43 million annually.
How Can Companies Limit Payment Fraud for Prepaid Customers?
Any company that accepts prepaid options when taking payments or issuing gift cards to customers must have a plan in place to make sure that every payment is secure. One of the most important things that an enterprise can do is to set up a platform that is able to detect unusual patterns involving prepaid options and gift cards. Large transactions or payments being made from a foreign country can often signal a breach in security. These activities can be flagged if an enterprise has tight security information and event management in place. It is essential for activities to be detected in real time for an enterprise to be able to prevent prepaid fraud from increasing.
The Pros and Cons of Prepaid Purchasing
Prepaid purchasing has some definite benefits. Consumers who fall victim to scams involving prepaid cards don’t risk the threat of losing an entire account. Any enterprise that allows customers to pay with prepaid options doesn’t have the same legal and financial responsibilities to large sums of money when they are stolen from accounts. When a prepaid card is stolen it won’t compromise a customer’s past, present and future personal information. The impersonal, isolated nature of prepaid options make them an appealing option for people that are worried about data breaches. However, the big danger of prepaid options is that funds are often irretrievable once they have been siphoned from a prepaid card. This means that a consumer could potentially lose hundreds or thousands of dollars if a card is stolen and is why all companies who deal with prepaid transactions should have the appropriate fraud prevention systems in place.