A prepaid fraud solution that's not in the cards, but in the packaging

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The simplest scams are sometimes the hardest to thwart. Rather than redesign its prepaid card with added security, InComm is redesigning the packaging in a way that should render stolen cards unusable.

Thieves like the idea of simply by taking a prepaid card out of its package and replacing it with a "dummy" card that has no value. When a buyer activates the "dummy" card by scanning its package at the point of sale, the real card in the thief's possession is loaded instead.

Atlanta-based prepaid card provider InComm is launching a new bar code encoding technique that requires both the card and the packaging to be present. If the card is removed, the bar code will not register at the point of sale.

Essentially, about two-thirds of the card activation code is on the packaging, with the final digits on the card inside of the package. The new technique "helps to protect our retail partners and the end consumer from fraud by invalidating a prepaid card that has been compromised before it's activated by a legitimate consumer," said Chanda Wicker, senior vice president of global production services at InComm.

In that regard, a fraudster trying to steal the card from the packaging would end up with a card that could never be properly activated. "A card that cannot be activated is rendered useless, which makes the purchase impossible to complete," Wicker said.

During InComm's initial run of prepaid cards using this printing technique, Wicker said the company saw "significant improvement" in the protection of those cards. The technology will apply to both gift cards and prepaid debit cards.

The new packaging will definitely thwart fraudsters who swap out cards, said Julie Conroy, research director and fraud expert with Boston-based Aite Group. However, they may adapt over time.

"As with everything else, if it is a pretty low-tech solution, we see that criminals can get through it pretty quick as well," Conroy said. "I want to learn more about what InComm is doing with this, but it appears to address the card swapping aspects."

Conroy cited incidents with Visa gift cards two years ago in which buyers were purchasing what they believed to be legit cards, only to find they had been tampered with and returned to the packaging. InComm's new packaging, or any sort of tamper-evident packaging, could be a deterrent for that kind of activity, she added.

InComm received a grant from the United States Patent and Trademark Office last week for the patent on the new packaging method.

Late last year, InComm addressed online security when it began using technology that constantly changes the CVV on the back of a reloadable prepaid card, incorporating the services of Tender Armor and its CVV+ solution.

"The intelligence we gain from our relationships with retail and brand partners guides us in our mission to protect them and their customers who rely on our products," Wicker said.

But fraudsters keep prepaid card providers on their toes, with a favorite trick being to simply write down or scan the card numbers, which are fully visible through regular packaging so that retailers can scan them when being activated by the buyer. The scammer will then regularly check online to see if that card is activated and will be accepted.

In that way, a person receiving a prepaid card as a gift might not know that someone else has already drained its value.

InComm would like to see all of those tricks thwarted, and is developing more anti-fraud tools to combat them, Wicker said.

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