Fraudsters are becoming more organized, sophisticated, and technologically advanced. They collaborate with other criminals by sharing information and the latest tools on the “dark web.”
In fact, these criminals have created a multi-billion dollar industry using disruptive technology to carry out fraud schemes. So, it seems natural that credit unions would look to innovative solutions to combat card fraud.
1. Biometric cards
Members already use biometrics (i.e., fingerprint recognition) to safeguard information stored on their phones, computers, and tablets. So why not use biometrics to keep their card information safe?
Studies show that a majority of consumers are not only familiar with using biometrics, but are interested in utilizing the technology in the payments context.
To pay with a biometric card, a member simply places their finger on a sensor located on the card when they insert the chip into an EMV-enabled reader. After the transaction, the fingerprint data remains on the card, so merchants will not receive or store any biometric data.
Data from the EMV chip informs the credit union whether the biometric authentication was a match. However, authentication failure can occur if the member’s finger is greasy or sweaty.
To prevent false declines, the member will be instructed to enter their PIN or sign a receipt if the fingerprint doesn’t match the information stored on the card.
Biometric cards are currently in the pilot stage for both VISA and MasterCard. Credit unions should monitor the availability of these cards, and consider implementing them when they become available for an added layer of security.
2. Geolocation services
Geolocation combats fraud by comparing the location of the transaction to the location of the member’s phone, which is determined using the mobile network, Wi-Fi connection, GPS, or a credit union’s app.
For example, if the member’s phone is located in Wisconsin and a transaction takes place in Italy, the transaction is more likely to be fraudulent. Alternatively, if the phone and transaction are located in the same place, it is less likely that the transaction is fraudulent.
Fraud analytics factor geolocation data when assigning a risk level to the transaction. Because the phone and transaction locations are analyzed quickly, a high-risk transaction can be declined on the spot.
This technology is especially effective in a lost, stolen, or counterfeit card scenario.
Credit unions should contact their card association (VISA, MasterCard, etc.) to learn more about the geolocation services they offer.
3. Big data and machine learning
Machine learning is the concept of a computer using data to “learn” to do something without being specifically programmed. The more “learning” the computer does, the better it performs the task.
One company that specializes in using data to help credit unions fight card fraud is Rippleshot. Through daily reports that rate the risk level of each card, Rippleshot informs the credit union which cards are likely to “go fraudulent.”
Rippleshot can detect compromised cards and ATMs in just two hours. Compare this to the manual process, which can take up to two weeks.
They can do this because they process about 30 million transactions each day. This can mean the difference of thousands of dollars in losses targeted by fraudsters.
Although effective, choosing one, or even all, of these solutions isn’t the be-all-end-all to card fraud mitigation. Fraud prevention is a layered approach of mindful policymaking, innovative technology, and vigilance.
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