Imagine a world in which fraud prevention achieves new levels of effectiveness. Imagine that this effectiveness is driven by cardholding consumers empowered to take on a more active role in determining their own levels of fraud protection. Imagine that this empowering comes through apps and tools accessed with their credit or debit cards. Sounds like fiction, doesn’t it? However, the truth is that when it comes to consumer-driven fraud prevention strategies, progress is being made.
According to a 2012 survey entitled, Global Consumers React to Rising Fraud: Beware Back of Wallet, by the Aite Group, 42% of U.S. responders were victims of fraudulent activities. As I write this, hackers who breached the retailer’s data security, stealing credit- and debit-card information relating to 40 million plus consumer accounts, recently hit Target and others. This has certainly impacted not only Target’s sales and reputation, but I’m sure it dampened the holiday spirit of many, since analysts at Javelin Strategy & Research estimate the bill for this breach at over $4 billion.
However, cardholder-enabled fraud prevention provides consumers with increased levels of protection and security. It also compels them to become more actively involved in preventing breaches of this type. Ideally, these consumer-controlled fraud prevention strategies would use smart technologies to provide an array of services consumers have been demanding. These include card-enabled controls such as setting transaction types, identifying merchants where the card is used, listing the merchant locations most frequently shopped and even setting spending thresholds. In this scenario, a consumer in Jacksonville, FL, could specify that the card is allowed to be used at her local Macy’s. Since she frequently visits her sister in Dayton, OH, she could also include her sister’s local Macy’s outlet as an allowable merchant location. She could also establish identity and spending limits for those times when her son is using the card.
Alerts would also be handled differently because they could be made actionable on the part of consumers. With consumer-controlled card products, the FI that issues the card still sends the alert, but the cardholder can then respond in a number of ways: They interact with the FI in real time to either raise a credit or spending limit, send a specific code that identifies the card holder accurately or verify the transaction taking place. The reporting of lost cards or suspected fraudulent usage would also be instant and actionable on both sides.
Consumer-controlled fraud is a mutually beneficial activity. Consumers benefit from increased awareness of the anti-fraud strategies at work. This increased awareness of the security surrounding them could gently push them into increased card usage. FIs benefit not only from the increased interest and fees but also from a reduction in costs related to staffing and tools involved in providing anti-fraud activities.
In fact, many of these benefits are being realized through the use of chip-and-pin strategies. Much of the rest of the world is already using similar tools (as of Q4, 2012, there is a 44.9% adoption rate worldwide but zero in the U.S., according to figures released by EMVCo).
According to Moneris Solutions, a leading North American payment processor, the use of chip-and-pin strategies helps both consumers and FIs realize the following benefits:
- A reduction in the rate of fraud
- A better payment experience for credit and debit users
- A stronger method of authentication than signature
- Potential to increase POS checkout speed
- Potential to reduce credit card disputes, charge-backs, Requests for Information (RFIs) and associated costs
Still, forward thinking companies in the financial services arena are committed to doing all they can to bring consumer-controlled fraud prevention to the marketplace. At FIS Global, we are working hard to do our part to help our customers help theirs. Last month, I mentioned our consumer-controlled fraud initiative, which I am happy to say is well underway. FIS will soon be launching a Fraud Alert Management Mobile App wihch delivers on the promise of consumer-controlled anti-fraud card strategies through an innovative mobile platform for card services. This platform is optimized to deliver real-time insight in an intuitive, easy-to-understand manner. It offers consumers increased visibility for both plastic and virtual card accounts, as well actionable alerts and messaging we discuss above. Using the FAM Mobile App, consumers can custom tailor their cards to match their personal spending patterns and requirements.
FIS Global is excited to be at the forefront of a technology that helps fight fraud in powerful ways. Moreover, I’m excited for consumers who will experience an unprecedented level of personal control in both their card usage and the attendant fraud prevention tools this initiative places in their hands.