Fraud is rampant on funds distributed by the Supplemental Nutrition Assistance Program (SNAP) for the needy, and both state and federal governments are having a hard time mitigating it, according to The Economist.
According to estimates from Haywood Talcove of LexisNexis Risk Solutions, fraudsters could steal up to $20 billion from SNAP over the next six months, which amounts to a fraud rate of 15%. The actual amount of fraud is difficult to measure, as it is often underreported, and the government’s estimates of fraud rates vary widely. The USDA notes a much lower fraud estimate: 0.02%.
“Moving towards contactless payments creates a fully modern process to SNAP programs,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “This combined with utilization of prepaid mobile phone programs establishes a fully universal mobile payment option, inclusive of prepaid debit cards, gift cards and benefit cards, for underserved and unbanked communities wrapped into a mobile wallet.”
There’s no doubt that fraud is increasingly rampant. Fraudsters typically gain access to the funds through phishing, card skimming, and finding customer information on the dark web. Fraud due to phishing and card skimming has become a significant problem in recent years, and the pandemic has only exacerbated the issue as the government distributed even more funds than usual.
Phishing, a tactic used by fraudsters to obtain personal information from individuals by posing as a trustworthy entity in electronic communication, is continuing to increase. This can include emails or messages that encourage people to reveal their account numbers, private identification numbers, and other important data. Once fraudsters have this information, they can use it to steal money from bank accounts or make fraudulent purchases.
Similarly, card skimming, is also evolving. It involves placing illegal gadgets over card readers and other devices to steal account information when someone swipes or inserts their card. This information can then be used to create counterfeit cards or make fraudulent purchases. Criminals can also sell this information on the dark web.
While it may be difficult to target phishing schemes, card skimming can be effectively made a non-issue by moving to contactless payments. A recent article in PaymentsJournal noted that the USDA is piloting contactless prepaid payment systems, which should help.