Cell phones are fast becoming sophisticated crime-fighting tools against credit card fraud.
With card fraud costing consumers and merchants billions of dollars annually ($48 billion in 2008, according to Javelin Strategy and Research), many companies are scrambling to find a solution to combat stolen card data, skimming and identity theft. Their weapons of choice? The more than 270 million cell phone users in the United States, and a string of recent technological innovations.
“A mobile device can empower the consumer,” says David Montague, founder of The Fraud Practice, a New Jersey-based fraud prevention consultancy. “The sooner you can alert a consumer to a fraudulent transaction and get them involved, the easier you can limit the amount of damage that can be done.”
Here are just a handful of services enabling cell phone owners to combat credit card fraud with just the push of a button:
Ericsson IPX Mobile Lookup
Telecommunications giant Ericsson developed mobile phone technology — dubbed Ericsson IPX Mobile Lookup — that can locate a person and determine if a credit card transaction is fraudulent by using mobile network information to locate a phone on most networks worldwide.
By specifying the network location where a handset is present, credit card companies can receive confirmation in a matter of seconds as to whether a customer is in the same country where a particular credit card transaction is being carried out. This fraud control application is especially useful in cases of overseas credit card fraud in high-risk countries.
The sooner you can alert a consumer to a fraudulent transaction and get them involved, the easier you can limit the amount of damage that can be done
|— David Montague|
The Fraud Practice
“For the thousands and thousands of credit cards that are stolen, consumers’ mobile devices often don’t come anywhere near where that credit card is actually being used,” says Montague.
But while Montague believes that IPX Mobile Lookup can be an effective tool, he warns that there are limitations to its crime-fighting power. “Ericsson’s IPX Mobile Lookup is really just confirming that the phone is in the same country, which has very limited value. To confirm that a phone is in America is great, but it’s not really going to help you fight fraud, except in extreme cases.”
Visa Europe’s mobile alert
Hoping to grant its cardholders greater peace of mind, Visa Europe is running a trial of a new mobile service that sends consumers instant transaction confirmation to their cell phones when they use their debit, credit or prepaid cards.
Here’s how it works: Cardholders can choose to receive an alert via a text or e-mail on any mobile device or to an application downloaded to a smart phone such as an iPhone. When a credit card transaction takes place, the service instantly sends the credit cardholder the time, location and amount of each transaction to a mobile phone.
Better yet, Visa Europe says that future developments could make it possible for cardholders to customize the content and delivery of alerts. For instance, a customer could request that transaction amounts are instantly converted into foreign currencies while traveling abroad.
Bank of America’s SafePass
Because credit card fraud is as ubiquitous online as it is in-store, Bank of America has created an online banking anti-fraud service that makes the most of mobile technology. Called SafePass, the service provides subscribers a six-digit, one-time pass code sent privately as a text message to a mobile phone. This code lets users safely transfer funds in and out of their credit card accounts, among others. The code is temporary and expires as soon as it’s used so that consumers can rest assured that they are the only ones authorizing credit card and other online transactions.
“SafePass provides a one-time use number so it’s good from the standpoint that the number can’t be reused,” says Montague. Nevertheless, he warns, “From a data breach standpoint, SafePass limits exposure to fraud, but it doesn’t prevent account takeovers from phishing” and other activities in which fraudsters attempt to steal sensitive information such as passwords and credit card details by falsifying a company’s identity. For this reason, it’s important that SafePass subscribers continue to keep their guard up when conducting online transactions.
MasterCard and mBlox
Typically, banks have relied on busy call centers to alert customers to instances of suspected credit card fraud. Even though a well-trained operator can handle up to 100 calls per day, there is often a significant waiting time between the moment the transaction is identified and the customer is contacted.
However, by teaming up with mobile network provider mBlox, MasterCard hopes to change all that. Combining mBlox’s messaging service with MasterCard’s fraud prevention technology, the two companies have created a service that immediately delivers a text message to bank customers to verify a high risk credit card transaction. MasterCard estimates its Short Message Service (SMS) or text-based solution will enable banks to send up to 10 messages for every telephone call placed to verify credit card transactions. This speed of response means cards can be blocked in a matter of minutes, reducing the number of fraudulent transactions once and for all.
As credit and debit card fraud continues to persist in the midst of a global financial crisis, no longer can consumers rely on time-strapped call center operators and paper-based notices to combat crime. Rather, cell phone technology promises to play a starring role in putting an end to fraudulent credit card transactions once and for all.