Consumers love the convenience of paying for goods and services in store by using their NFC enabled smartphones and stored credit cards. This is demonstrated by the fact that you can download retailer specific apps for your smartphone to pay for everything from coffee, to movie tickets, to poutine using a retailer specific mobile app.
As more and more retailers embrace this technology and release their own mobile apps with in-store payment options, the threat of fraudsters looking to benefit from flaws in the implementation, or by exploiting the human component must be carefully considered. The following are a few example Card Not Present (CNP) fraud schemes that retailers who offer in-store purchasing using a store branded mobile app should be aware of.
In these scenarios, we will use the imaginary retailer Smoothie Shop. Smoothie Shop has a mobile app that allows customers to save their credit card in the app in order to facilitate easy in-store purchases. Consumers log into their Smoothie Shop account using an email address and password. Smoothie Shop has recently seen an increase in CNP fraud and chargebacks, but is unable to pinpoint the root cause.
Smoothie Shop mobile app login
In this scenario, the fraudster has to take over an existing Smoothie Shop account. This is known in the industry as Account Takeover (ATO) which is explained here.
In this scenario the fraudster has lucked out! Since the account that was taken over by the fraudster already has a credit card saved in the app, the fraudster can simply walk over to a Smoothie Shop, present the mobile app with the saved credit card information and enjoy a refreshing smoothie that was paid for via some other Smoothie Shop customer’s stored credit card.
Again this scenario requires the Frauster to take over an existing Smoothie Shop account, however this scenario requires a little bit more legwork, and is less profitable as Fraud Scheme #1 above. Since the Smoothie Shop account that was taken over does not have a credit card saved in the app, the fraudster will instead need to buy a stolen credit card off the Dark Web or some other electronic market*, and then add the freshly purchased credit card to the Smoothie Shop account and app. Once this is done, the fraudster proceeds in-store to obtain smoothies using the stolen credit card.
Why would the fraudster go through the trouble of taking over an existing Smoothie Shop account you ask? Good question! Fraudsters are aware that aged accounts (e.g. accounts more than 3-6 months old) with a good transaction history are usually given more leeway and transactions from these accounts are less closely scrutinized when compared to a brand new account with no transaction history.
*Stolen credit cards can be acquired for as little as $3 or as much as several hundred dollars depending on the credit limit, zip/postal code, issuing bank, etc.
screenshot from Dark Web Credit Card market
This scheme doesn’t require taking over an existing account, but instead requires the fraudster to use a bot tool or a human clickfarm to create hundreds of “fake” Smoothie Shop accounts. Once the fraudster has access to multiple Smoothie Shop fake accounts, he can then add in as many stolen credit cards as he pleases in order to make in-store purchases at Smoothie Shop, each one being a unique incident of CNP fraud.
In-store payment via Smoothie Shop mobile app and stored credit card