Originally published January 24 2005
Underwriting in the credit card industry is a simple method of controlling risk
by Mike Adams, the Health Ranger, NaturalNews Editor
Among the hardest things for credit card underwriters to manage are internet fraud and identification theft, which account for huge losses in the credit card industry. Internet fraud usually takes the form of pyramid schemes, credit repair scams and travel, charity, or work-at-home scams. As well, identification theft is a major cost to the credit card industry, though it is often difficult to track the thieves.
The underwriting department works in conjunction with the risk department to assist in identifying risk exposure for the prevention of losses.
Underwriting guidelines are based on a number of factors, including past experience, industry trends and forecasts, and information from law enforcement and other security organizations.
These guidelines, or policies, also outline and list what information merchants need to provide for the merchant agreement.
Today I will share with you some of the issues and concerns we face on a daily basis in underwriting and how I feel we must adapt to not only thrive but also survive in the industry today.
According to CyberSource Corp.'s sixth annual survey of online fraud, losses due to fraud will total $2.6 billion in 2004 for Internet merchants.
This increase implies that merchants reject more than four orders for every one on suspicion that it is actually fraudulent.
More than ever, many credit card processing accounts are set up with the sole intention of committing fraud and reaping financial reward.
Identity theft struck 9.9 million Americans and cost businesses and consumers almost $53 billion last year, according to a recent Federal Trade Commission report.
Somebody would steal your wallet or look over your shoulder at an ATM to get your PIN.
But using the Internet, criminals can now access thousands of identities and disperse that information to an organized network of criminals.
The following is a typical scenario for this type of crime: Criminals obtain stolen identity information.
We must continually find balance in being overly cautious and providing quick turnaround time frames for approving new merchant accounts.
Chris Hester is Production/Underwriting Manager for Electronic Exchange Systems (EXS), a national provider of merchant processing solutions.
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