Technology review 2010: Controlling fraud - payment cards
The dynamics of payment card fraud are clearly changing as VISA Europe’s analysis of the evolution of payment card fraud in Europe, described in Figure 1, shows. Payment card fraud has become a global business dominated by international crime rings. It is a major problem, with losses estimated at around $5 billion globally. But although this is a huge number it still represents only a very small percentage of the total amount spent on cards worldwide. Even in the worst-affected countries, such as the UK, the ratio of payment card fraud to sales stands at only 0.101% compared with VISA Europe’s average of 0.06%.
The banks and payment card companies continue to combat constantly mutating fraud. Almost as soon as one source is eradicated, another appears. Many different techniques and technologies are being used, including chip and PIN, obligatory pre-notification of international travel, transaction alerts and dynamic one-time authentication passwords. One of the latest is the real-time scoring of payment authorization requests. This new service from VISA Europe, due to go live in April, uses neural networks and predictive technologies from Fico to estimate in real time the likelihood of fraud in each authorization request. The scoring is based on the visibility of all cross-border and other card payments on the VISA network and fraud data supplied by VISA member banks. This new development is expected to reduce considerably the unnecessary decline of genuine card-not-present and cross-border payment card transactions.