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Card blocking, consumer alerts are keys to fraud prevention

July 17, 2014 by Dan Kramer — Senior Vice President, Marketing & Merchant Servic, SHAZAM

Financial organizations are on high alert regarding payments fraud in the wake of recenthigh profile customer data breaches. Although overall payments fraud has decreased, attacks targeting debit and credit cards continue to rise.

The majority of financial service companies continue to be affected by payments fraud, according to a recent Association for Financial Professionals survey. Sixty percent of respondents said their organizations were exposed to actual or attempted payments fraud. Additionally, 63 percent said they have either adopted more stringent security measures or are planning to do so in the near future.

Compared with 2013, fraud involving payment cards has risen significantly. Forty-three percent of those exposed to fraud attacks reported that credit or debit cards were targeted. That’s up from 29 percent in 2012 and 20 percent in 2011.

Even so, the report concludes that overall payments fraud has declined in the past five years. In AFP’s 2009 survey, 73 percent of those polled reported attempted or actual fraud. That declined to 71 percent in 2010, 68 percent in 2011, and 61 percent in 2012.

This study reiterates the importance of sophisticated fraud detection and card blocking strategies. With card-blocking technology, financial institutions can react swiftly in emergency situations. By accessing an online tool, FI personnel can quite literally shut down entire groups of transactions with the click of a button.

For instance, if FI personnel receive a series of fraud reports originating from grocery stores in Illinois, they can put a block on grocery stores in the entire state. Thus, transactions meeting the criteria will be blocked right at the point of sale, saving the issuer an untold amount of money.

More defined strategies can be put into place following the emergency block. However, blocking entire geographical areas and merchant codes is sometimes necessary to stop the bleeding until further investigation can be done. Card-blocking technology allows exactly that.

Further, FIs must provide fast, easy recovery processes for any cardholder who experiences fraud. It’s also essential for FIs to educate their customers about specific ways to protect their accounts and information against fraud, and to keep them informed of the FI’s fraud policy and processes.

There are technologies that exist today to make it easy for FIs to enlist their customers in the fight against payments fraud. Our own mobile app, Shazam Bolts, sends near real-time email alerts to cardholders anytime a suspicious purchase hits their associated account.

With sophisticated fraud detection strategies, clear communication, and effective education, FIs and cardholders can work together to help mitigate payment fraud losses in 2014.

photo: Jim Pennucci