The Dangers of False Credit Card Fraud Triggers

Kris Carrera
Senior Vice President of Product – Financial Services
Posted on May 9, 2017

Ensuring travelers are not needlessly rejected for legitimate payments.

It’s an all too common and highly embarrassing problem for corporate travelers: a credit card transaction is rejected during a business trip and the card is locked. They are then faced with hours of time clearing their name and reactivating their card.

Protecting customers from fraud is our utmost priority. But if your tools leave you blocking legitimate business, you risk driving away good customers. What’s an issuer to do?

One Chance to Dissatisfy a Customer

Despite the increasing sophistication of software to combat fraud, there remain many legitimate transactions that trigger fraud warnings. While rejecting the transaction and blocking the card is of overall benefit to customers, the risk is that lucrative business travelers can be caught up because their travel or other factors may signal a false positive for fraud.

Unfortunately, if this happens, the likely first response is that the cardholder will resort to another card to cover the bill if they can. From there, that secondary card probably takes top-of-wallet status for the rest of the trip, and can likely stay there. After all, regaining consumer confidence in a card that has the potential to humiliate them is no easy task – that customer may be lost forever.

There must be better ways to reduce and even eradicate these triggers.

Location Matters

Developments in technology and networking are providing mechanisms that offer valuable tools to help credit card fraud systems better differentiate between legitimate and illegitimate transactions.

The long-established method has required travelers to call their banks and tell them where and when they’ll be traveling so credit card payment processors can link the payment location to the cardholder. The problem is that plenty of people don’t bother calling. Fortunately, technology can add some value.

When a cardholder’s smartphone detects that it is in a foreign country, the card’s app could remind that person to change their permission settings. Since smartphone users tend to have their phones with them at all times – and many business travelers travel with international-capable phones – this increases the likelihood that they can take self-service action to verify their location.

Other data innovations also can help card issuers follow the movements of their users so they can pair cardholder and transaction locations. For example, information from travel agency bookings using a particular card can tell you where and when a customer will travel. Then, you can automatically update your fraud rules to allow payments from that location for the duration of the trip.

A further possibility is that geolocation detection within a smartphone can confirm the location of the cardholder and the transaction. The converse is also true; the chances that a transaction is fraudulent are a lot higher if the payment takes place in a location separate from the phone.

Trigger Happy

By linking transactions to the true location of the cardholder, whether from smartphone geolocation or travel itinerary, the number of falsely triggered fraudulent transactions will reduce dramatically – it may even eradicate rejections based purely on location. Meanwhile, cardholders can be encouraged to take an active role in protecting themselves by actively influencing the card issuer’s fraud rules and triggers.

With increasing amounts of enriched transaction and consumer location data available, credit card issuers can provide a greatly improved service to their users. Banks can know where customers are and adapt accordingly by approving payments and drastically reducing false triggers. (Note: Given the sensitivity, it is likely that such invasive schemes will be opt-in services, and will primarily appeal to the business traveler on a corporate card, with the general retail user demographic coming later.)

While many declined payments do indeed protect customers against fraudulent activity and costly chargebacks, a significant percentage of online rejections are unnecessary. It is vital that card issuers can differentiate fraudulent transactions from unnecessary, preventable credit card declines. After all, a single blocked purchase drastically increases the likelihood that the cardholder selects a competitor’s service. One genuine false trigger can lose a customer for good, so applying some prudent safeguards to limit such false triggers is essential.

Have false credit card triggers affected you?

Leave a Reply

There is 1 comment for this article
  1. GalFinTech at 2:04 pm

    “The chances that a transaction is fraudulent are a lot higher if the payment takes place in a location separate from the phone.”

    Could using a mobile-wallet for these purchases be the deterrent in these fraud flags as it combines both? And if so, is it important that banks focus more on their digital strategy than their card strategy?

Kris Carrera
Senior Vice President of Product – Financial Services

With over 25 years of international payments experience, Kris was responsible for the launch of the first successful cobranded card program. A leader in risk-based pricing and target marketing using predictive data analytics, she specializes in merchant services, credit cards and home equity. Kris has received Best Travel Card, Best Cobranded Card and Best Private-Label Program awards.