Top Risks and Controls for Card Services

The Fastest Growing RISK REGISTER for Banks, Insurance Companies, Brokerage Firms, Money Service Bureaus and Fintechs

Nov 2024

A bank's card services department handles a variety of transactions utilising credit, debit, and prepaid cards.

It is essential for banks to conduct risk assessments in order to protect the security of their customers' data and financial assets given the sensitive nature of financial information and the potential hazards associated with conducting card transactions.

Risk analyses assist in identifying potential weak points in card service operations, such as fraud, data breaches, or system failures, and in formulating mitigation methods.

Banks can preserve client confidence and safeguard the integrity of their card services by undertaking risk assessments.

Analytics and Reporting Function

Prepares management reports, including metrics for financial performance and risk management, after collecting and analysing data linked to card services.

RISK : Bias
Analytics and reporting can be biased if the data used to generate insights is skewed or incomplete. This can lead to incorrect assumptions or decisions that negatively impact the business or customers.

Controls :

Continually assess the precision and applicability of the analysis's conclusions. This can help to spot any biases or mistakes and make sure the analysis holds up over time.
Implement regular data quality checks to make sure that the data is correct, comprehensive, and up to date. Find and fix any data mistakes, gaps, or inconsistencies that might affect the correctness of the conclusions drawn.
Involve subject-matter experts to confirm the conclusions drawn from the analysis. Their knowledge and judgement might lessen the possibility of making skewed assumptions and decisions.
Make sure the sample size is suitable for the analysis that will be performed. Avoid using tiny sample numbers because they could lead to skewed analysis.
Regularly review and audit the models and algorithms used to produce insights. Verify their objectivity and that they deliver precise, unbiased results.
Stakeholders should be included in the analysis process. This can lessen the danger of making biassed assumptions and conclusions and help to ensure that the analysis is pertinent to them and meets their needs.
The approach utilised to produce insights, along with any presumptions and constraints, should be clearly documented. Make sure the process is clear and simple to comprehend so that it can be repeated.
Utilise a variety of data sources to develop a thorough grasp of the issue you are attempting to solve. To lessen the possibility of bias, it is crucial to incorporate data from several sources, views, and channels.

RISK : Data quality
Analytics and reporting depend on accurate and reliable data. Poor data quality, such as incomplete or inconsistent data, can result in inaccurate or misleading insights. This can lead to incorrect business decisions and potentially cause financial losses.

Controls :

Assign particular people or teams the duty of ensuring the accuracy of the data.
Compare the output of analytics and reporting on a regular basis to recognised criteria or benchmarks to ensure correctness.
Establish criteria and standards for the gathering, maintenance, and preservation of data.
Implement data validation checks to make sure the data is accurate, consistent, and complete.
Staff should receive training on best practises for data quality management.
To ensure correct data management practises and accountability, create a data governance framework.
To ensure that data can be tracked from its source to its usage, implement data lineage tracking.
To find and proactively fix data quality concerns, use data profiling approaches.
To standardise, deduplicate, and fix data discrepancies, use data cleansing technologies.
Utilise automated tools and manual methods to routinely monitor and audit data integrity.

RISK : Data security
Analytics and reporting require access to sensitive customer and financial data. If this data is not properly secured, it can be vulnerable to theft or unauthorized access. This can lead to breaches of customer privacy or fraudulent activity.

Controls :

Access Control: Implement strict access controls to ensure that only authorized personnel have access to sensitive customer and financial data. This includes using strong authentication mechanisms like multi-factor authentication, regularly reviewing and updating user access privileges, and employing role-based access control to limit access to only necessary data and functions.
Encryption: Encrypt sensitive customer and financial data both at rest and in transit. This involves using robust encryption algorithms and securely managing encryption keys. Encryption helps protect data from unauthorized access, even if the data is intercepted or stolen.

RISK : Lack of transparency
Analytics and reporting can be complex and difficult to understand. If the insights and conclusions generated by analytics and reporting are not transparent, it can be difficult for stakeholders to fully understand the risks and opportunities presented.

Controls :

Enhance documentation and explanations: Provide comprehensive documentation and clear explanations alongside analytics and reporting outputs. This includes defining key metrics, methodologies, assumptions, and limitations. Transparent documentation helps stakeholders gain a deeper understanding of the insights generated, enabling them to assess the associated risks and opportunities more effectively.
Standardize and simplify reporting formats: Implementing standardized and simplified reporting formats can significantly enhance clarity and understanding for stakeholders. Consistent and intuitive presentation of analytics and insights helps ensure that stakeholders can easily comprehend and interpret the information.

RISK : Overreliance on analytics
While analytics and reporting are powerful tools for monitoring and understanding business operations, there is a risk of overreliance on data-driven insights. This can lead to a lack of intuition and creativity, which can be essential for identifying emerging risks and opportunities.

Controls :

Diverse Decision-Making Teams: Establishing diverse decision-making teams that include individuals with different backgrounds, expertise, and perspectives can help mitigate the risk of overreliance on data-driven insights. This diversity encourages a wider range of perspectives and promotes creative thinking, allowing for a balanced approach to decision-making.
Human Expertise Validation: Implementing a validation process that involves subject matter experts reviewing and challenging data-driven insights can help mitigate the risk. These experts can bring their intuition and experience to the analysis, providing a necessary human perspective that complements the data-driven approach.

Card Operations Function

Oversees day-to-day card service operations, such as card issuance, card activation, and cardholder assistance.

RISK : Card fraud
Fraudulent activities can occur during any stage of card operations, from card issuance to transaction processing. This can include identity theft, counterfeit card production, skimming, and chargeback fraud.

Controls :

Create and maintain a detailed fraud management policy that outlines the reporting and investigation processes for suspected fraud.
Implement stringent identity verification policies, such as requesting multiple pieces of identification and completing in-depth background checks, before issuing cards.
Install and maintain efficient physical and electronic security measures, such as network firewalls, card readers with tamper detection, and video monitoring, to avoid skimming.
Regularly and thoroughly teach your team on fraud prevention, detection, and response techniques.
To find weaknesses and assure compliance with industry rules and standards, conduct routine audits and reviews of card operations.
To stop counterfeiting, use tamper-resistant and secure card production methods.
Utilise chargeback management technologies to efficiently address and look into possible chargeback fraud.
Utilise fraud detection tools to track transactions in real-time and spot any odd or suspect patterns of behaviour.

RISK : Compliance and regulatory risks
Card services are subject to various regulations and compliance requirements, such as data privacy laws and anti-money laundering regulations. Failure to comply with these regulations can result in legal and financial penalties.

Controls :

Check the card services provider's compliance with all relevant laws and rules on a regular basis to make sure they satisfy the requirements.
Create a backup plan to deal with any fines and other consequences of not adhering to rules and procedures.
Create a compliance programme that includes routine assessments and revisions of policies and practises to guarantee they satisfy legal requirements.
Create a method for reporting violations of rules and specifications, and set penalties for noncompliance.
Establish a robust anti-money laundering (AML) programme that involves transaction monitoring, customer due diligence, and reporting questionable activity to regulatory authorities.
Establish a system of impartial audits to confirm adherence to rules and specifications.
Protect sensitive cardholder data by implementing strict data privacy policies and procedures, such as encryption, access limits, and audit trails.
To identify and stop fraudulent acts and guarantee compliance with laws, use technology solutions including fraud detection systems, identity verification, and machine learning algorithms.
To identify potential compliance issues and create measures to reduce those risks, conduct regular risk assessments.
To make sure that all personnel who handle card services understand and abide by rules and standards, provide routine compliance training for them.

RISK : Cybersecurity threats
Card operations involve the processing and storage of sensitive customer data, making them vulnerable to cybersecurity threats such as hacking, phishing, and malware attacks.

Controls :

Conducting regular employee training and awareness programs: Educating employees about cybersecurity best practices, such as recognizing phishing emails, avoiding suspicious links or attachments, and following secure data handling procedures, helps mitigate the risk of successful phishing attacks and human errors that could lead to data breaches.
Implementing strong network security measures: This includes using firewalls, intrusion detection and prevention systems, and secure network architecture to protect card operations from hacking attempts and unauthorized access.

RISK : Operational errors
Human error can occur at any stage of card operations, such as card activation, transaction processing, and customer support. Operational errors can lead to financial losses, reputational damage, and customer dissatisfaction.

Controls :

Robust Training and Education: Implement comprehensive training programs to ensure employees are well-equipped with the knowledge and skills necessary to perform their tasks accurately. Focus on specific areas prone to human error, such as card activation, transaction processing, and customer support. Ongoing education and regular updates can help mitigate the risk of operational errors.
Strong Quality Assurance Procedures: Establish rigorous quality assurance processes to review and validate card operations at various stages. Regular audits, monitoring, and spot-checking can identify errors before they result in significant consequences. This includes implementing reconciliation processes, independent reviews, and error tracking systems to ensure errors are promptly addressed and corrected.

RISK : System failures
Card operations rely heavily on complex and interconnected systems, such as card processing networks and online banking platforms. A failure in any of these systems can lead to significant financial losses, reputational damage, and customer dissatisfaction.

Controls :

Redundancy and Backup Systems: Implementing redundant and backup systems for card processing networks and online banking platforms can greatly mitigate the risk. This involves creating duplicate systems that can take over in the event of a failure, ensuring continuity of operations and minimizing financial losses.
Robust Monitoring and Alerting: Establishing comprehensive monitoring and alerting mechanisms helps identify potential system failures or anomalies early on. Proactive monitoring allows for immediate action to address issues before they escalate, minimizing financial losses, reputational damage, and customer dissatisfaction.

Compliance and Regulatory Affairs Function

Ensuring that all applicable rules and regulations are followed by the bank's card services.

RISK : Compliance with Payment Card Industry (PCI) Standards
Card services companies must adhere to PCI Data Security Standards, which are designed to ensure the secure handling of cardholder information. Non-compliance with these standards can result in penalties and damage to the company's reputation.

Controls :

For the purpose of preventing unauthorised access to cardholder data, implement a secure network infrastructure.
Make sure that only authorised workers have access to cardholder information by implementing strict access restrictions and password policies.
Protect cardholder data during transit and storage by using encryption technologies.
To deal with any security lapses or incidents involving cardholder data, have a documented incident response plan in place.
To detect and reduce any potential risks connected to the security of cardholder data, conduct routine risk assessments.
To determine compliance with PCI Data Security Standards, periodically conduct external audits with qualified third parties.
To ensure that workers understand their duties in securing cardholder information, train them on security best practises and provide regular security awareness training.
To find any non-compliance concerns and promptly address them, conduct routine internal audits.
To maintain continuing compliance with PCI Data protection Standards, policies and procedures relating to the protection of cardholder data should be reviewed and updated on a regular basis.
To stay up to date with the most recent security threats and vulnerabilities, update software and security systems frequently.

RISK : Consumer Protection
Card services companies must comply with consumer protection laws and regulations, which govern the marketing, disclosure, and handling of payment cards. Violations of these laws can result in legal and financial penalties, as well as damage to the company's reputation.

Controls :

All staff should get training on the significance of adhering to consumer protection rules and regulations, as well as ongoing updates and awareness efforts to keep them informed of any changes.
Engage a third party auditor to perform routine audits to make sure consumer protection rules and regulations are being followed.
Ensure that all transactions, disclosures, and client complaints are accurately and completely documented.
Ensure that the board of directors is updated on the company's compliance programme and is aware of how it complies with laws and regulations protecting consumers.
Establish a procedure for accepting and handling consumer complaints, including timely and appropriate investigation and resolution.
Implement a vendor management programme to guarantee that all outside service providers abide by the rules and legislation governing consumer protection.
To ensure conformity to consumer protection laws and regulations, develop and implement a compliance programme with policies, processes, and controls.
To handle any infractions of the rules and regulations governing consumer protection and to lessen any adverse effects on the company's reputation, develop and implement an incident response strategy.
To identify and assess potential risks associated to compliance with consumer protection laws and regulations, conduct frequent risk assessments.
To spot any potential infractions and implement corrective measures, conduct routine internal audits and monitoring.

RISK : Data Security Breaches
Payment card data breaches can occur due to inadequate security measures, which can result in unauthorized access to sensitive customer information. These breaches can lead to financial losses, legal penalties, and damage to the company's reputation.

Controls :

Access Controls: Implementing strict access controls helps prevent unauthorized individuals from accessing payment card data. This includes using strong authentication methods, such as multi-factor authentication, and limiting access privileges to only those who need it.
Encryption: Implementing strong encryption measures for payment card data can significantly mitigate the risk of unauthorized access. Encrypting sensitive customer information makes it difficult for attackers to decipher the data even if they gain unauthorized access.

RISK : Fraudulent Activities
Card services companies must comply with laws and regulations aimed at preventing fraudulent activities such as money laundering, identity theft, and other financial crimes. Failure to comply with these regulations can lead to significant penalties, including fines and even criminal charges.

Controls :

Conducting regular risk assessments: Regularly assessing and monitoring risks associated with money laundering, identity theft, and other financial crimes is vital. This involves identifying vulnerabilities in existing systems, processes, and controls, and implementing appropriate measures to mitigate those risks effectively. It helps to stay updated with evolving regulations and industry best practices.
Implementing a robust compliance program: Establishing a comprehensive compliance program that includes policies, procedures, and internal controls to ensure adherence to relevant laws and regulations is crucial. This program should cover areas such as anti-money laundering (AML), know your customer (KYC) requirements, and fraud prevention measures.

RISK : Regulatory Changes
Card services companies must stay up-to-date with changes in regulations and laws governing payment cards. Failure to comply with new regulations can lead to significant penalties and damage to the company's reputation.

Controls :

Conduct regular compliance assessments and audits: Regular assessments and audits help identify any gaps or non-compliance issues with current regulations. This allows the company to proactively address and rectify these issues before they become serious problems. It is important to establish a comprehensive compliance program that includes periodic internal audits and external assessments by independent experts.
Implement a robust regulatory monitoring system: This involves establishing a dedicated team or utilizing specialized software to continuously monitor and track changes in regulations and laws governing payment cards. This system should provide timely alerts and updates to ensure that the company stays informed about new requirements.

Credit and Risk Management Function

In charge of evaluating credit applications, establishing credit limits, and controlling credit risk in relation to card services.

RISK : Creditworthiness of cardholders
Credit card issuers face the risk that their cardholders may not be able to repay their credit card debt. This may happen due to financial hardship, job loss, or other reasons that make it difficult for the borrower to meet their repayment obligations.

Controls :

Create a thorough method for managing collections to promptly and effectively recover delinquent debts.
Determine a borrower's eligibility for credit based on their income and credit history. This can lower the chance of borrowers borrowing more than they can afford.
For customers who are having trouble paying their credit card bills, you might choose to lower the interest rate.
Maintain sufficient loss provisions to absorb the effects of credit losses and guarantee the continued financial viability of the credit card operation.
Make sure the borrower has a reliable income and credit history to lower the chance of default by conducting a thorough credit evaluation.
Provide cardholders with debt consolidation assistance to help them combine their debts and make their repayments more reasonable.
To assist avoid overspending and financial difficulty, teach cardholders how to responsibly use credit cards, including creating budgets and managing money.
To detect potential credit risks and create backup strategies to manage them, conduct periodical stress testing.
To make sure that borrowers are aware of their repayment commitments and are reminded to make payments on time, set up automatic payment reminders.
To spot early warning indications of financial difficulty and to take measures to avert defaults, keep an eye on the credit performance of the debtors.

RISK : Default risk
Credit card issuers face the risk that their cardholders may default on their credit card debt. This can happen if the borrower is unable to repay the debt or if they choose not to pay. Default risk can result in significant financial losses for the credit card issuer.

Controls :

Consider the applicant's credit history, work situation, and other pertinent aspects when conducting a full credit risk evaluation of each credit card application.
Customers should have their credit card privileges suspended if they consistently fail to make the minimum payment in order to avoid collecting more debt.
Customers who don't make their minimum payment on time should be charged late fines, which can encourage them to do so.
Establish a strong collection procedure to recover overdue amounts and deal with customers who are having financial difficulties to come up with a payback strategy that benefits both sides.
Keep in constant contact with cardholders to learn about their needs and spot possible problems before they become serious, which can assist avoid defaults.
Maintaining a reserve fund for credit card default losses might serve as a safety net in case of unforeseen losses.
Offer credit counselling services to clients who are having trouble managing their debt and staying out of default.
Put fraud prevention procedures in place to stop fraudulent transactions that could leave customers with unforeseen credit card bills that they might not be able to pay.
Send consumers reminders about payments on a regular basis to encourage prompt payment of their credit card debt.
Set reasonable credit limits depending on the customer's capacity to pay and keep an eye on how they are using their credit to make sure they are not accruing more debt than they can manage.

RISK : Fraud risk
Credit card issuers face the risk of fraud when cardholders use their credit cards to make purchases. Fraudulent activity can lead to financial losses for the credit card issuer, as they may have to reimburse the cardholder for unauthorized charges.

Controls :

Strong Authentication: Implementing robust authentication measures, such as two-factor authentication (2FA) or biometric verification, can significantly reduce the risk of fraud. This ensures that only authorized cardholders can make purchases, making it harder for fraudsters to exploit stolen credit card information.
Transaction Monitoring and Analysis: Employ advanced fraud detection systems that constantly monitor and analyze credit card transactions for suspicious patterns or anomalies. Machine learning algorithms and AI-based models can help identify and flag potentially fraudulent activities in real-time, enabling prompt intervention and mitigation.

RISK : Interest rate risk
Credit card issuers face the risk of changes in interest rates that can affect their profitability. If interest rates rise, the cost of borrowing for cardholders increases, and they may become more reluctant to use their credit cards.

Controls :

Diversification of Revenue Streams: Credit card issuers can reduce their reliance on interest income by diversifying their revenue streams. This can be achieved by offering additional financial products and services, such as personal loans, mortgages, or investment products. By expanding their offerings, issuers can offset any potential decline in credit card usage resulting from higher interest rates.
Interest Rate Hedging: Credit card issuers can implement interest rate hedging strategies to mitigate the risk of changes in interest rates. This involves entering into derivative contracts, such as interest rate swaps or options, to protect against adverse interest rate movements. Hedging helps to stabilize the cost of borrowing for cardholders and reduce potential fluctuations in profitability.

RISK : Operational risk
Credit card issuers face the risk of operational failures, such as system outages, data breaches, or errors in account management. These failures can result in financial losses and reputational damage for the credit card issuer.

Controls :

Incident Response and Business Continuity Planning: Developing comprehensive incident response plans and business continuity strategies helps credit card issuers effectively handle operational failures. These plans should outline clear steps to address system outages, data breaches, and errors in account management, minimizing financial losses and reputational damage. Regular testing and updating of these plans are also essential.
Robust IT Infrastructure and Security Measures: Implementing a secure and reliable IT infrastructure with strong cybersecurity measures is crucial to mitigate the risk of operational failures. This includes regular system maintenance, real-time monitoring, firewalls, intrusion detection systems, encryption, and secure data storage.

RISK : Payment processing risk
Credit card issuers face the risk of payment processing errors, such as duplicate charges or incorrect amounts. These errors can result in financial losses for the credit card issuer and damage to their reputation.

Controls :

Regular Reconciliation and Monitoring: Conducting frequent reconciliation and monitoring of transactions can help detect and correct any errors promptly. This control involves comparing payment records, identifying discrepancies, and taking appropriate actions to rectify the errors before they escalate into financial losses or reputational damage.
Robust Payment Processing System: Implementing a reliable and secure payment processing system with built-in validation and error-checking mechanisms can significantly reduce the occurrence of payment processing errors, such as duplicate charges or incorrect amounts. This control is the most effective measure to mitigate the risk.

Customer Service Function

Supports cardholders by responding to questions, resolving conflicts, and handling complaints.

RISK : Inconsistent service quality
If the quality of customer service varies widely among representatives, it can lead to an inconsistent customer experience. This can lead to confusion and frustration for customers who receive conflicting information or different levels of service.

Controls :

Create standard operating procedures and scripts that describe how agents should respond to frequent consumer questions and complaints. This will lessen the possibility of contradicting information and assist maintain consistency in service delivery.
Create standardised training courses that each representative must pass before speaking with clients. The best practises for customer service, problem-solving strategies, and communication should all be included in this training.
Give customer care representatives resources, like knowledge bases, FAQs, and customer relationship management software. These resources can aid representatives in giving consumers accurate and consistent information.
Offer rewards to employees that continuously deliver top-notch customer service. Bonuses, recognition initiatives, or promotions may fall within this category. This will encourage employees to offer dependable service and uphold high levels of client satisfaction.
Provide reps with continual coaching and training to assist them hone their customer service abilities and resolve any weak points. Individual coaching sessions, group training sessions, or online learning modules can all be used to accomplish this.
To gauge representative performance and provide dependable assistance, establish customer service KPIs. Customer satisfaction ratings, initial call resolution rates, and average handle time are a few examples of metrics.
To make sure that representatives are following customer service guidelines and offering consistently high-quality service, regularly monitor and evaluate their performance. Customer feedback, call recording, or mystery shopping can all be used for this.

RISK : Lack of personalization
If customer service representatives are unable to provide personalized service to customers, it can lead to a feeling of being treated like a number rather than an individual. This can result in customers feeling undervalued and unappreciated.

Controls :

Create customer service training courses that emphasise the value of offering individualised service and cultivating enduring connections with clients.
Customer service rules and procedures should be periodically reviewed to discover areas for improvement and made appropriate.
Establish an environment where customer service personnel are urged to go above and above to provide personalised service and let clients know they are valued.
Giving customer support employees access to client history and notes, customised scripts, and other resources will enable them to personalise encounters.
Implement a CRM system that enables customer care personnel to keep track of client interactions and preferences so they can deliver individualised support.
To ensure that high-value clients or accounts receive individualised attention and care, assign dedicated customer service professionals to those accounts or customers.
To help customer service personnel develop their people skills and forge closer bonds with clients, offer them continual training and support.
Use technology to personalise client interactions, such as chatbots or AI-powered systems that can detect and react to customer preferences and behaviour.

RISK : Limited hours of operation
If customer service hours are limited, it can be difficult for customers to get the help they need outside of regular business hours. This can lead to frustration and dissatisfaction if customers are unable to resolve issues promptly.

Controls :

Implement extended customer service hours: By extending customer service hours beyond regular business hours, organizations can provide support to customers when they need it most. This control reduces the risk of frustration and dissatisfaction caused by limited availability.
Offer self-service options: Providing self-service options such as online FAQs, knowledge bases, and chatbots allows customers to find answers and resolve issues independently, even outside of regular business hours. Self-service options enhance customer convenience and reduce reliance on limited customer service hours.

RISK : Long wait times
If customers have to wait on hold for a long time to speak with a customer service representative, it can lead to dissatisfaction and frustration.

Controls :

Implement Call Queuing System: Utilize a call queuing system that informs customers of their approximate wait time and provides options for callbacks or self-service solutions. This helps manage customer expectations and allows them to choose the most convenient option.
Increase Customer Service Representative (CSR) Availability: Employing more CSRs to handle customer calls can reduce wait times and improve customer satisfaction. This can be achieved by hiring additional staff or outsourcing customer service to a third-party provider.

RISK : Poor communication
If customer service representatives are unable to communicate effectively with cardholders, it can lead to frustration and confusion. This can result in customers not receiving the information they need to manage their accounts or resolve issues.

Controls :

Communication Training: Provide comprehensive training programs to customer service representatives to enhance their communication skills, including active listening, clarity in speech, empathy, and effective response techniques. This will help ensure that representatives can effectively communicate with cardholders, reducing frustration and confusion.
Knowledge Base and Documentation: Develop a centralized knowledge base and documentation system that contains accurate and up-to-date information about account management and issue resolution. This resource should be easily accessible to customer service representatives, enabling them to provide accurate and timely information to cardholders, thereby reducing confusion and improving customer satisfaction.

Dispute Resolution Function

Handles disagreements including incorrect billing charges, fraudulent transactions, and other card service-related problems.

RISK : Billing errors
Billing errors can occur when the credit card issuer makes a mistake in calculating the cardholders balance or interest charges. These errors can result in disputes that are time-consuming and costly to resolve.

Controls :

Conduct routine audits of credit card statements to spot any trends of mistakes and take timely corrective action.
Demand that credit card companies deliver thorough monthly statements that make apparent all charges, interest rates, and payments made on the account.
Establish a precise procedure for resolving complaints and looking into billing issues, together with the necessary documents and deadlines.
Give clients clear instructions on how and for how long they can contest billing issues.
Implement a procedure for following up with credit card issuers to guarantee prompt dispute settlement and error repair.
Implement automated tools that can detect possible billing issues and alert the right people to fix them.
Review and reconcile credit card statements frequently to check for correctness and find any balance or interest charge anomalies.
To assist in keeping an eye on credit card statements and spotting any billing issues, think about using a third-party provider.
To make sure staff employees are knowledgeable about the procedure and capable of spotting problems, conduct routine training for those who are in charge of reviewing and reconciling credit card statements.
Use a credit card company with a solid reputation and a track record of accurate invoicing and dispute handling.

RISK : Chargebacks
Chargebacks occur when a cardholder disputes a transaction and requests that the credit card issuer reverse the charge. Chargebacks can result in financial losses for the issuer, as they may have to reimburse the cardholder for the disputed amount.

Controls :

Assure adherence to all laws, rules, and industry norms that pertain to chargebacks and customer complaints. By doing this, chargeback-related legal and reputational problems may be reduced.
Client service representatives should receive training on handling and resolving client issues. This can assist in avoiding chargebacks brought on by misunderstandings or inadequate dispute settlement.
Create a mechanism for resolving disputes that is transparent and fair to both customers and the issuer. This can aid in settling conflicts and avert chargebacks.
Create avenues for fast and transparent communication with consumers to address their issues and disagreements. This can assist in resolving problems before they develop into chargebacks.
Keep thorough records of all transactions and related activity, such as interactions with customers and attempts to resolve disputes. Chargebacks may be contested using this supporting material.
Make ensuring that every transaction is duly authorised, confirmed, and recorded. This may assist in avoiding chargebacks brought on by unauthorised transactions.
Meet all commitments pertaining to the good or service being sold, including making sure that it is delivered or rendered as promised. By doing this, you may be able to avoid disputes and chargebacks brought on by customer complaints about the good or service.
The transaction description should be very clear about the good or service being sold. This makes the transaction easier for cardholders to understand and lowers the chance of a dispute.
Track chargeback activity and look for trends or patterns that could point to problems with the offering (goods, services, or customer support). This can assist in locating prospective areas for development and avert chargebacks in the future.
Utilise fraud detection tools to spot possibly fraudulent transactions in advance. This may assist in avoiding chargebacks brought on by fraudulent activity.

RISK : Disputed fees
Cardholders may dispute fees associated with their credit card, such as annual fees or late payment fees. If the dispute is not resolved in the cardholders favor, they may be less likely to use their credit card or recommend it to others.

Controls :

Clear and Transparent Fee Disclosure: Providing clear and transparent information about credit card fees, including annual fees and late payment fees, reduces the likelihood of cardholders disputing these charges. Clearly communicating fee details and terms upfront helps set realistic expectations and minimizes surprises for cardholders.
Responsive Customer Service: Establishing an efficient and customer-centric dispute resolution process is crucial. Promptly addressing cardholder disputes and providing timely and satisfactory resolutions can help retain customers and prevent them from resorting to negative actions, such as reducing card usage or sharing negative recommendations. A responsive customer service team that actively listens to cardholders' concerns and takes appropriate actions can help maintain customer satisfaction.

RISK : Fraudulent transactions
Fraudulent transactions can result in disputes between the cardholder and the credit card issuer. If the issuer is unable to resolve the dispute in the cardholders favor, they may suffer financial losses.

Controls :

Enhance customer verification processes: Strengthening the verification process during cardholder transactions can minimize the risk of fraudulent transactions. This may include multi-factor authentication, biometric verification, or address verification systems. By ensuring that the cardholder's identity is properly validated, the chances of disputes stemming from unauthorized transactions are reduced.
Implement robust transaction monitoring and fraud detection systems: This control involves using advanced analytics and algorithms to identify suspicious patterns or behaviors associated with fraudulent transactions. It helps detect and prevent fraudulent activities, reducing the likelihood of disputes and financial losses.

Fraud Prevention and Detection Function

Accountable for identifying and stopping fraud related to card services.

RISK : Account takeover
Account takeover occurs when a fraudster gains access to a victim's online banking or credit card account and makes unauthorized transactions. This can happen when a fraudster obtains a victim's login credentials through phishing or other means.

Controls :

Apply multi-factor authentication (MFA) while logging into your credit card or online banking account. In order to access their account, the user will need to give more than one authentication factor (for example, a password and a one-time code texted to their cell phone).
Conduct routine audits of user accounts to find inactive or dormant accounts, disable them, and confirm that users have the right access credentials.
Create an incident response strategy that describes what should be done in the event that an account takeover is suspected or verified. This could lessen the effects of the attack and speed up recovery.
Implement account lockout regulations that, after a predetermined number of unsuccessful login attempts, temporarily lock an account. By doing this, password guessing brute-force attacks can be avoided.
Keep an eye out for any unexpected transactions or changes to the account information whenever you use your credit card or online banking.
Think you providing consumers with fraud insurance to help them recover from financial damages brought on by account takeover. Customers may benefit from increased security and peace of mind as a result.
Users should be encouraged to create secure passwords that are hard to decipher or guess. Put in place password strength standards including minimum length, complexity, and expiration date.
Users should receive education on phishing scams and how to avoid them. Don't forget to include advice on how to spot phishing emails and links as well as how to report any questionable activity.
Utilise fraud monitoring and detection systems that can identify ominous activity, such as login attempts coming from unknown places or devices.
Utilise risk-based authentication to evaluate the risk associated with each login attempt depending on the device, location, and behaviour of the user. This can aid in spotting suspicious behaviour and, if necessary, launching further authentication procedures.

RISK : Card not present fraud
Card not present fraud occurs when a fraudster uses stolen credit card information to make purchases online or over the phone. This type of fraud is more difficult to detect than in-person fraud and can result in significant financial losses.

Controls :

Customers should be asked for extra identification while making transactions, such as a one-time password delivered through SMS or email, in addition to their credit card number.
Customers should be required to enter the three-digit security code located on the back of their credit card.
Customers should be required to enter their billing address and have it compared to the address on file with the credit card company.
Customers should receive instruction on how to protect their credit card data and evade phishing frauds.
Determine each transaction's risk rating, and for high-risk transactions, demand additional verification.
Implement software that analyses trends and identifies possible fraudulent transactions using machine learning methods.
Keep track of a certain customer's transaction volume and frequency to spot any unusual or suspicious conduct.
Make sure the payment gateway is PCI compliant and safe before using it for online transactions.
Real-time transaction monitoring allows for alerting clients to any questionable behaviour.
Use the customer's IP address to pinpoint their location and contrast it with the credit card's linked location to look for any differences.

RISK : Card skimming
Card skimming involves stealing credit or debit card information through a small electronic device known as a skimmer, which is placed on card readers such as ATMs or gas pumps. Skimming can result in unauthorized charges or identity theft.

Controls :

Regular Inspections and Maintenance: Implement a proactive approach by conducting regular inspections and maintenance of card readers, such as ATMs and gas pumps, to identify and remove any skimming devices promptly. This control helps to detect and mitigate skimming risks effectively.
Tamper-Evident Seals and Security Features: Implement tamper-evident seals and security features on card readers to provide visual indicators of tampering. These seals make it easier to identify if a skimming device has been installed. Regularly check and verify the integrity of these seals to ensure they haven't been compromised.

RISK : Chargebacks
Chargebacks occur when a cardholder disputes a charge on their account, and the merchant is forced to refund the transaction. While chargebacks are a legitimate customer protection mechanism, they can also be exploited by fraudsters who claim that they did not receive a product or service or that the transaction was unauthorized.

Controls :

Clear and detailed transaction documentation: Maintain accurate and detailed records of customer transactions, including order information, delivery confirmation, and customer communication. This documentation serves as evidence in case of a dispute, allowing the merchant to demonstrate that the product or service was provided as agreed upon.
Enhanced transaction monitoring and fraud detection systems: Implementing robust systems that monitor transactions in real-time can help identify suspicious activities and potential instances of fraud. This allows merchants to take immediate action, such as contacting the customer or implementing additional verification measures, to prevent chargebacks.

RISK : Counterfeit cards
Counterfeit cards are created using stolen credit card information and can be used to make fraudulent purchases. These cards often have a different name or number than the original card.

Controls :

Real-Time Transaction Monitoring: Utilizing advanced fraud detection systems that analyze transaction patterns and anomalies in real-time can help identify and block suspicious activities associated with counterfeit cards. Machine learning algorithms can be employed to identify unusual spending patterns, geographic inconsistencies, or multiple transactions within a short time period, triggering alerts for further investigation.
Two-Factor Authentication (2FA): Implementing a robust two-factor authentication system can greatly mitigate the risk of counterfeit card fraud. By requiring an additional verification step, such as a unique code sent to the cardholder's mobile device, it becomes significantly harder for fraudsters to use stolen credit card information.

RISK : Friendly fraud
Friendly fraud occurs when a cardholder disputes a charge that they actually authorized, often in order to avoid paying for a purchase or service. This can be difficult to detect and can result in financial losses for merchants and banks.

Controls :

Enhanced Customer Authentication: Implementing strong customer authentication measures can reduce the risk of friendly fraud. This can include multi-factor authentication, biometric authentication, or token-based authentication, which adds an extra layer of security and ensures that the cardholder is indeed the authorized user.
Robust Transaction Monitoring System: Implementing a comprehensive transaction monitoring system that utilizes advanced analytics and machine learning algorithms can help detect patterns and anomalies indicative of friendly fraud. This system should track and analyze transaction data in real-time to identify suspicious activities or discrepancies between authorization and dispute claims.

RISK : Identity theft
Identity theft occurs when a criminal steals a persons personal information, such as their name, address, and social security number, and uses it to open a credit card account in their name. The criminal can then make fraudulent purchases on the account.

Controls :

Data Encryption: Utilize strong encryption techniques to protect personal information, such as names, addresses, and social security numbers, both during transit and when stored in databases. Encryption adds an extra layer of security and makes it significantly more difficult for criminals to access and misuse the data.
Strong Identity Verification Processes: Implement robust identity verification measures to ensure that individuals accessing sensitive information or opening credit card accounts are who they claim to be. This can include multifactor authentication, knowledge-based authentication questions, or biometric authentication methods.

RISK : Lost or stolen cards
If a credit card is lost or stolen, it can be used by someone else to make fraudulent purchases. This risk can be mitigated by prompt reporting of lost or stolen cards and quick card replacement.

Controls :

Prompt Reporting of Lost or Stolen Cards: The most effective control is to promptly report any lost or stolen credit cards to the issuing bank or credit card company. This allows them to immediately block the card and prevent any unauthorized transactions.
Quick Card Replacement: The second most effective control is to request a quick replacement for the lost or stolen credit card. The issuing bank or credit card company should expedite the process of issuing a new card to minimize the window of opportunity for fraudulent purchases.

RISK : Phishing
Phishing is a fraudulent practice that involves sending emails or messages that appear to be from legitimate sources in order to obtain personal or financial information. Phishing scams can be very convincing and can lead to identity theft, fraudulent charges, or unauthorized access to bank accounts.

Controls :

Multi-Factor Authentication (MFA): Implementing MFA as an additional layer of security for user accounts and systems. MFA requires users to provide multiple pieces of evidence to authenticate their identity, such as a password and a unique, time-sensitive code sent to their mobile device. This significantly reduces the risk of unauthorized access, even if phishing attempts are successful in obtaining passwords.
User Education and Awareness: Providing comprehensive training and awareness programs to educate users about the risks and characteristics of phishing attacks. This includes teaching them how to identify suspicious emails, recognize phishing indicators, and avoid clicking on malicious links or providing personal information.

Marketing and Sales Function

Accountable for attracting new clients and promoting the bank's card services.

RISK : Misaligned incentives
Credit card issuers may incentivize their sales staff to prioritize sales over customer needs, which can lead to unethical behavior and potential legal liability.

Controls :

Create a policy that encourages employees to report any unethical behaviour without worrying about facing punishment. This policy should spell out how anonymous reports can be filed and what procedures will be taken to look into them.
Create performance indicators that encourage the sales team to put the requirements of the customer ahead of sales goals. For instance, rather than rewarding sales employees based on sales volume, consider customer satisfaction levels.
Customers should be encouraged to voice their opinions and grievances regarding the sales team. Surveys, feedback forms, and complaint hotlines can all be used for this. Utilise this feedback to spot any unethical behaviour or practises and deal with them.
Establish a system of oversight and monitoring to make sure the sales team abides by the code of conduct and ethical standards. Regular audits, checks, mystery shopping, and customer surveys can all fall under this category.
Implement a thorough code of conduct that spells out moral guidelines for the sales team to abide by. The customer's demands must be prioritised in this guideline, and any unethical behaviour must be strictly prohibited.
Make sure the sales personnel receives frequent training so they are aware of ethical standards and the repercussions of acting unethically. The code of conduct, consumer needs, and legal liability should all be included in this training.
Reward sales workers for moral actions and conduct. This may involve rewards and incentives for adhering to the code of conduct and placing the needs of the client first.
To manage the sales process and guarantee that it conforms with all pertinent laws and regulations, designate a compliance officer or legal counsel. Regular audits of sales practises and procedures should be part of this oversight.

RISK : Misleading advertising
Credit card issuers may engage in misleading advertising practices, such as making false or exaggerated claims about the benefits of their cards, which can lead to customer dissatisfaction and legal liability.

Controls :

A designated compliance officer must regularly evaluate and approve all advertising and marketing materials to make sure they are compliant with applicable laws and do not make untrue or exaggerated claims.
Create and put into effect comprehensive advertising and marketing policies and procedures that go by all relevant laws and regulations.
Employees should get regular instruction on the value of adhering to rules and avoiding deceptive advertising tactics.
Establish explicit internal reporting mechanisms for potential violations of advertising laws, along with steps to take to address infractions when they do occur.
Initiate a procedure for handling customer complaints concerning deceptive advertising tactics.
Maintaining compliance requires continual monitoring of changes to advertising legislation and adjusting policies and procedures as necessary.
Perform due diligence on third-party marketing partners and providers to make sure they abide by the law and don't use deceptive advertising techniques.
To identify possible exposure points for deceptive advertising tactics, conduct regular risk assessments and, where necessary, install additional measures.
To make sure that advertising and marketing materials continue to adhere to compliance guidelines, conduct routine audits and monitoring.
To prevent confusion or misunderstanding on the part of customers, make sure you provide accurate and clear disclosures of the terms and conditions pertaining to credit card perks and fees.

RISK : Noncompliance with regulations
Credit card issuers may violate regulations, such as the Truth in Lending Act or the Fair Credit Reporting Act, which can lead to legal liability and reputational damage.

Controls :

Regulatory Compliance Monitoring and Internal Audits: Implementing a robust system to monitor and ensure compliance with regulations such as the Truth in Lending Act and the Fair Credit Reporting Act is crucial. Regular internal audits can help identify any potential violations and address them promptly, reducing the risk of legal liability and reputational damage.
Staff Training and Awareness Programs: Educating employees about relevant regulations and their responsibilities can significantly reduce the likelihood of inadvertent violations. Training programs should cover key requirements of the Truth in Lending Act and the Fair Credit Reporting Act, emphasizing the importance of compliance and the potential consequences of non-compliance.

RISK : Unfair sales practices
Credit card issuers may engage in unfair sales practices, such as pressuring customers into signing up for credit cards they don't need or can't afford, which can lead to customer complaints and legal action.

Controls :

Implement robust sales training and monitoring programs: Establish comprehensive training programs to educate credit card issuers about ethical sales practices, emphasizing the importance of transparency, customer needs assessment, and responsible lending. Regularly monitor sales activities to detect any signs of unfair practices and provide corrective measures as necessary.
Strengthen internal controls and compliance oversight: Develop and enforce strong internal controls and compliance policies to prevent unfair sales practices. This includes implementing clear guidelines and procedures for customer interactions, ensuring proper disclosure of terms and conditions, and conducting regular audits to identify and address any compliance gaps.

Merchant Services Function

Oversees interactions with businesses that take credit and debit cards from the bank.

RISK : Chargebacks
Chargebacks occur when a customer disputes a transaction and requests a refund from the credit card issuer. Chargebacks can result in financial losses for credit card issuers, particularly if they occur frequently or in large amounts.

Controls :

Before completing any transaction, confirm the customer's identity to make sure the cardholder is authorised and the person making the purchase.
Before processing each transaction, use an address verification service (AVS) to confirm the customer's billing address. This can lessen the chance of chargebacks brought on by erroneous transactions.
Customers can better grasp what they are buying and what to expect with a clear and unambiguous return policy. This will lessen the possibility of chargeback requests being made because the goods or service was not understood.
Inform clients of the chargeback procedure's operation. This can lessen the possibility that chargeback requests will be made because people won't grasp the procedure.
Install methods for detecting and preventing fraud that can catch potentially fraudulent transactions before they are executed. This can lessen the chance of chargebacks brought on by erroneous transactions.
Keep complete records of each transaction so you may produce them as proof in the event of a chargeback dispute. This can facilitate quicker dispute resolution and prevent monetary damages.
Providing a variety of payment methods can aid in lowering the likelihood of chargebacks. Offering consumers a variety of payment options can boost customer satisfaction and lower the chance of chargebacks because of problems with payments.
Providing top-notch customer service can assist stop chargebacks before they start. Responding to consumer questions and complaints is crucial, as is finding a swift and equitable solution to any problems.
To minimise more costs and fines, respond to chargeback requests quickly and effectively. Additionally, the likelihood of a successful resolution might be increased by a prompt answer.
To monitor chargeback patterns and spot possible problems, implement chargeback monitoring and management tools. This makes it easier to spot risky regions and put preventative measures in place to lessen them.

RISK : Fraudulent merchants
Fraudulent merchants may engage in activities such as processing fraudulent transactions or engaging in money laundering, which can result in losses for credit card issuers and harm to their reputation.

Controls :

As required by law, make sure you promptly and accurately disclose any fraudulent actions to the appropriate authorities and stakeholders.
Assure that the merchant complies with all pertinent legal and regulatory standards; if not, enforce penalties.
Conduct regular assessments of merchants to spot any changes in their operational processes, financial standing, or risk profile, and take necessary action.
Conduct regular risk assessments of all merchants, including evaluations of their financial stability, adherence to laws and regulations, and other significant risk concerns.
Create a crisis communication plan to handle any reputational concerns brought on by any fraudulent business practises.
Give merchants instruction and training on the best practises for preventing fraud and adhering to legal and regulatory obligations.
Implement procedures for handling chargebacks, which should include keeping a record of all chargebacks and conducting investigations into and settling any disputes.
Monitoring payment gateways will help you spot and stop any suspicious transactions, patterns, or trends that could be signs of fraud.
Utilise technologies and tools for fraud detection to spot and stop fraudulent activity. This involves keeping an eye out for odd patterns in transactions and placing known fraudulent merchants on a blacklist.
Verify the identities of merchants and keep an eye out for any suspicious activity by implementing KYC and AML procedures.

RISK : Noncompliance with regulations
Merchants may violate regulations such as the Payment Card Industry Data Security Standards (PCI DSS), which can lead to data breaches and potential legal liability for credit card issuers.

Controls :

Implement strong access controls and authentication mechanisms: This control involves enforcing strict user authentication measures, such as multi-factor authentication, to ensure that only authorized individuals have access to sensitive cardholder data. It also includes implementing robust access controls to restrict privileges and limit access to necessary personnel only.
Regularly perform comprehensive security assessments and audits: Conducting regular security assessments and audits helps identify vulnerabilities and weaknesses in the payment card environment. This control ensures that security measures are up to date and compliant with PCI DSS requirements. It includes conducting penetration testing, vulnerability scanning, and reviewing system configurations to proactively detect and address potential risks.

RISK : Payment processing errors
Payment processing errors can occur if merchants enter incorrect transaction information, which can result in financial losses for credit card issuers and inconvenience for customers.

Controls :

Automated Data Validation: Implement automated validation checks on transaction information entered by merchants to identify and flag potential errors or inconsistencies, reducing the likelihood of incorrect data entry and payment processing errors.
Real-Time Transaction Monitoring: Utilize real-time transaction monitoring systems that can analyze incoming transaction data for anomalies and potential errors. This allows for prompt detection and notification of any incorrect information entered by merchants, enabling timely corrective actions to mitigate financial losses and inconvenience.

Technology and Innovation Function

It is their responsibility to create and deploy technology solutions that increase the effectiveness and efficiency of card services.

RISK : Competitive pressure
Failure to keep up with new innovations introduced by competitors may result in lost market share and revenue for credit card issuers.

Controls :

Create a programme for innovation and development to explore fresh concepts and produce new goods that satisfy consumer demand. To make sure that this programme remains relevant to the market, it should be frequently assessed.
Engage customers to learn about their preferences and needs, then utilise this knowledge to direct product development and innovation projects.
Find new technologies and concepts that can be implemented into the credit card issuer's product offerings by working with fintechs and other cutting-edge businesses.
Keep an eye out for new breakthroughs in the market and among your competitors so you can react fast with fresh product lines or improvements to current ones.
Keep tabs on the performance of new product introductions and innovation projects to gauge their effectiveness and make adjustments as needed.
Provide staff with opportunities for training and development to keep them abreast of current developments in the credit card sector.
Think about joining up with or buying businesses that are experts in cutting-edge technology that can be leveraged to improve the credit card issuer's products.
To ensure new product development and innovation projects are compliant with all applicable requirements.
To identify and reduce risks connected to projects for new product development and innovation, use a risk management programme.
To keep up with new trends and advances in the credit card sector, conduct routine market research and analysis. This will make the issuer more current on new developments and better equipped to compete with other issuers.

RISK : Regulatory compliance
New innovations may not comply with applicable regulations, resulting in legal liability and reputational damage for credit card issuers.

Controls :

Before releasing any new innovations, conduct extensive legal and regulatory compliance checks.
Create a process for evaluating the risks associated with regulatory compliance as part of your risk assessment for new inventions.
Create a strong internal control structure to guarantee that all goods and services adhere to all applicable rules and laws.
Employ compliance officers with knowledge of the credit card sector to supervise adherence to legal regulations.
Employees should receive regulatory requirements training and be made aware of the regulations that are relevant to their line of work.
Ensure that all partners and suppliers follow the law, and include compliance clauses in any agreements with them.
Establish a structured procedure for tracking and evaluating the performance of compliance controls.
Initiate a procedure for notifying and looking into potential compliance issues.
Review compliance policies and practises frequently to make sure they are current with changing regulatory needs.
To make sure that innovations adhere to regulatory requirements, keep up of regulatory changes and interact with regulatory authorities.

RISK : Technology failure
New innovations may not work as intended, resulting in operational disruptions and financial losses for credit card issuers.

Controls :

Rigorous Change Management Processes: Establish strong change management procedures to closely monitor and control the introduction of new innovations. This involves conducting impact assessments, obtaining appropriate approvals, and maintaining a clear documentation trail to track changes and ensure proper oversight throughout the implementation process.
Robust Testing and Quality Assurance: Implement thorough testing protocols to assess new innovations before deployment. This includes functional and stress testing to ensure the intended functionality and performance of the innovation, identifying any potential issues or vulnerabilities early on.

RISK : Uncertainty of customer adoption
New innovations may not be adopted by customers, resulting in wasted resources and potential losses for credit card issuers.

Controls :

Market Research and Customer Engagement: Conduct thorough market research to identify customer needs and preferences before investing in new innovations. Engage with customers through surveys, focus groups, and feedback mechanisms to gather insights and validate potential ideas. This helps ensure that the innovations align with customer demands, reducing the risk of non-adoption.
Pilot Testing and Proof of Concept: Implement a controlled pilot program to test new innovations with a smaller group of customers before full-scale deployment. This allows for early identification of any issues or challenges and provides an opportunity to refine the innovation based on user feedback. By validating the viability and value of the innovation through a proof of concept, credit card issuers can minimize the risk of wasted resources.