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Credit card usage alerts?

Posted by Michael Bloch in ecommerce (Friday April 14, 2006 )

Back in late 2000/early 2001, I wrote to all the major credit card companies with an idea – a simple enough concept I thought which could minimize a great deal of credit card fraud.

The idea may not prevent initial fraud, but one of the great problems of compromized cards is that they are absolutely hammered by fraudsters until the card is decommissioned.

Regardless of any consumer protection in terms of cardholder liability, fraud causes inconvenience, and not just to the cardholder.

It’s the merchants where the card is used who sustain the greatest financial loss. The longer a compromized card is active, the more headaches for cardholders, merchants and banks alike – plus increased costs in time for all parties in cleaning up the mess caused by the fraudster.

All that was involved in the idea I submitted was the sending of an email to the cardholder each time their card was used – this could be extended to ATM cards and online transfers as well. This way, account holders could be alerted if they were being defrauded very early on and take action to prevent further unauthorized access.

Less time “live” = less loss, simple. Everyone’s a winner – or more accurately, loses less.

As the fraudster wouldn’t be able to use a single card for as many purchases/transfers; they’d have to “work” a lot harder, which may even force some of them to abandon their criminal activities :).

Currently, every time I perform a funds transfer to certain European countries, my bank queues the transaction and calls me to get a confirmation. It’s a nice service which protects my interests, but inconvenient to me and expensive for the bank. I usually miss their call, have to decipher a case/extension number left on my voicemail, I call them back, get put on hold etc. etc.

My 2001 idea for the most part fell on deaf ears, except for Visa who displayed some interest, then abruptly ceased communications. Not even a “we’ve heard it before” :).

All this sprang back to mind when reading the results of a surveypublished late last year which stated that 70 percent of respondents would like to be informed whenever their credit card is used.

So, obviously the need is out there – I’m not sure why it has not been implemented; the technology is most certainly available. In fact, if the banks and card companies are concerned about the security of email and given that just about everyone has cell phones these days, SMS alerts may be also viable.

An SMS alert for a queued wire transfer could take a similar form to the new PayPal Mobile service, where a text message is sent and the cardholder texts back a PIN number to allow the transfer to proceed.

I’m sure this extra layer of security could be worked into email as well – and would be cheaper than having a bank staff member having to place a call to the account holder.

While banks most certainly are not responsible for fraud, they play a huge role in minimizing it – I’m really puzzled as to why something like this is not industry standard as yet. It’s very proactive and also puts some of the burden back on the cardholder – a more co-operative approach to minimizing fraud

Related:

For merchants – minimizing credit card fraud



 

 
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