Why stolen European credit card numbers cost 5 times as much as U.S. ones

Federal prosecutors charged a group of Eastern European hackers on Thursday with stealing credit card data and other personal information from a slew of high-profile companies, including Nasdaq, J.C. Penney and 7-Eleven. The crime allegedly lasted at least seven years and resulted in hundreds of millions of dollars in losses.

(Daniel Acker/Bloomberg)

But the crew accused of selling the data only collected about $10 for each stolen American credit card number, according to the indictment, while European numbers netted the hackers around $50 a pop. So, why are American cards so much cheaper on the black market?

It's a function of supply and demand and the structure of the online underground economy, according to Levi Gundert, a former U.S. Secret Service  agent and current principal for threat intelligence at Team Cyrmu, a nonprofit Internet security research firm.

According to Gundert, the "real driver is primarily monetization potential -- if you have individuals that have successfully monetized a specific type of card there will be increased demand."

But to understand how monetization works in this market, we need to dig a little into how the online underground economy is structured. Think of it like a pyramid, with criminal innovators and very technically gifted hackers on top. They are the ones compromising major databases, and are often Eastern European or Russian.

The hot shot hackers store the credit card information after they compromise databases and sell it in batches to various vendors and middlemen, sometimes dumping info years after the initial breach. The middlemen then sell it to end users who attempt to use them in fraud. Those end users are frequently based in North America, where it's easier to commit credit card fraud.

This is where a demand for European cards can come in. The professionals in this business are usually very adept at finding a specific monetization scheme, and they frequently need a specific type of card or one attached to a specific bank to pull them off. One of theses  schemes that was still working in recent years relied on the difference in credit card technology and transcontinental lags in fraud protection.

Merchants in Europe use chip-and-PIN security measures on credit cards. The chip contains all the same sort of information in the magnetic strips on U.S. cards, and after you swipe it you must also enter a PIN to complete the transaction like you would with a debit card. U.S. merchants aren't set up for the advanced security features on European cards. So when European cards are used in the United States, they fall back to the old-fashioned magnetic strips used here.

But some European banks and credit card providers have a delay in processing transactions over weekends. So, fraudsters could clone European cards and go on weekend spending sprees, capitalizing on the delay while the transactions make it across the pond and through fraud analytics processing. The result: a wave of credit card fraud by American criminals targeting European victims.

Another factor in the low cost of U.S. credit cards in these criminal schemes: It's easier to get them. "There's an overwhelming amount of U.S. card supplies" on the black market, Gundert says. And that's a direct result of database compromises like the one reported Sunday. U.S. companies are frequent victims of those compromises, according to Gundert, and "there are many more that haven't been discovered or reported on yet."

This flood of stolen American credit cards pushes down the price of American cards. Monetization schemes that only work with foreign cards push up the value of European credit cards. The result: Stolen European credit card credentials can be worth five times more than American information.

Andrea Peterson covers technology policy for The Washington Post, with an emphasis on cybersecurity, consumer privacy, transparency, surveillance and open government.
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Andrea Peterson · July 29, 2013