Prof. Jayanth R. Varma’s Financial Markets Blog

A blog on financial markets and their regulation

Credit card frauds

One of the world’s foremost experts on computer security,
Bruce Schneier, writes on his blog
about the recent theft of 130 million credit card numbers:

Yes, it’s a lot, but that’s the sort of quantities
credit card numbers come in. They come by the millions, in large
database files. Even if you only want ten, you have to steal
millions. I’m sure every one of us has a credit card in our
wallet whose number has been stolen. It’ll probably never be
used for fraudulent purposes, but it’s in some stolen database
somewhere.

Years ago, when giving advice on how to avoid identity theft, I
would tell people to shred their trash. Today, that advice is
completely obsolete. No one steals credit card numbers one by one out
of the trash when they can be stolen by the millions from merchant
databases.

I had read in the past about online thieves selling credit card
data for a few cents per thousand cards, but I did not realize that
things were so bad.

What is also interesting is that you do not need to use credit
cards in online transactions, or in some fraud prone South East Asian
country for your card number to land up in a stolen database. The
number gets stolen from large retail chains in the best of
countries.

Of course, Schneier is talking only about credit card numbers, so
with the increasing use of two factor authentication, it may take
something more to actually use the card, but that something more is
often surprising little.

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