FICO plans to help credit and debit card-issuing banks cut down on fraud through its new service that uses a mobile phone to determine a cardholder's location.
The FICO Proximity Location Service is designed to cut down on false positives in card transactions, specifically for travelers making international transactions, says Gabriel Hopkins, senior director of product management at FICO. Based on the proximity of the phone and the payment card, the bank can block a cardholder account or clear it for further transactions.
The proximity matching reduced the number of false positives, or those transactions the bank investigated because they appeared to be fraudulent, on international transactions by as much as 70 percent during trials with U.K. card accounts, FICO says.
San Jose-based FICO, which has an office in London, is first providing the service to U.K. banks, but eventually wants proximity location service to be "a global story, not a local story," Hopkins says.
Several U.K. clearing banks are developing plans to use the anti-fraud service, which was developed in partnership with ValidSoft Ltd., a unit of Elephant Talk Communications Corp.
Proximity location is at the core of ValidSoft's technology, called Valid-POS. The technology utilizes telecommunications support for what ValidSoft calls Proximity Correlation Logic, which can determine the location of a mobile phone.
Visa Europe has implemented ValidSoft's mobile and cloud-based technology in fraud protection since 2010.
"This technology really hits a sweet spot for banks with customers who travel overseas," Hopkins says. "The banks set it up as a service customers can opt-in to, which is important so they understand this is the use of external data to protect them against fraud."
Most issuers tend to offer a proximity fraud service on an opt-in basis, says Julie Conroy, senior analyst and fraud expert with Boston-based Aite Group.
"Issuers in pilot tests with this type of technology have told us the key is in how to position it with the end customer so that they don't think it is like Big Brother watching over them," Conroy says. As such, they offer the service as optional, while promoting it as a way for the customer not to worry about false positives, she adds.
"It saves the embarrassment [of a blocked transaction] if you are in Paris on a trip using your cards, but the bank doesn't know you are there," Conroy says.
Issuers generally position proximity location fraud services as complementary to other security methods, Conroy adds.
Two years ago, Offaly, Ireland-based ValidSoft began plans to bring the technology to banks in the U.S.
At that time, ValidSoft CEO Pat Carroll acknowledged that U.K. consumers were concerned about privacy, but noted that EuroPrise, a security certifying body in Europe, confirmed Valid-POS as a secure data fraud system utilizing an anonymous encrypted service.
ValidSoft brings extensive experience with the telecommunications systems to the table and is well established as a trusted provider in the U.K., Hopkins says.
The location service operates as part of FICO's Fraud Resolution Manager, an automated two-way communications service that processes fraud cases through data assessment, management decisions and customer intervention. FICO says it allows financial organizations to process many cases simultaneously, perform investigations and interact with customers to reach resolution in seconds.
"Banks have very sophisticated fraud prevention tools, and so do telecommunications companies," Hopkins says. "It is exciting to be able to bring the two together to help prevent fraud."