Mobile banking apps that allow consumers to proactively lock their debit cards, or limit their cards' use to specific scenarios, could shift the way banks manage fraud and even enable them to place some of the liability on the consumer.

Many banks have already implemented the feature, which serves as an alternative to reissuing cards during risky scenarios. For example, Malauzai Software, one vendor of this technology, said use of its card on/off technology rose 330% in the wake of the Target Corp. data breach.

Smart e-Money Inc., which offers a similar product called LockByMobile, pushes this point even harder by insisting that the feature gives consumers some skin in the game.

"Empowering your bank customers to lock and unlock their card accounts somehow shifts the liability to the customer as they are now in full control of all their transactions,” said Angelito Villanueva, vice president and head of innovation at Smart e-Money, in an interview at Finovate Europe in London.

If a bank does not want to side with its customer in a fraud dispute, the bank could use LockByMobile “to refute the claim of the consumer,” he said.

LockByMobile allows consumers to link a number of cards to a bank-branded or standalone app and to lock the card so it cannot be used. Cards can be locked when not in use or restricted to use only for certain regions, currencies, amounts, channels or merchants. For instance, a U.K. consumer could block any transaction that’s initiated in the U.S. or any transaction over $1,000.

Banks can also add their own parameters. If a bank tells consumers that they must lock their phone to certain purchases proactively and noted that within the terms and conditions, the liability for fraudulent transactions could be moved to the consumer, said Villanueva.

But Visa and MasterCard may not let this happen. The card networks are the providers responsible for the Zero Liability protections, which assure consumers they will never be liable for unauthorized transactions. 

Whether or not liability can shift away from the banks, providing consumers with more ways to manage and secure their payment products is always beneficial, said Zil Bareisis, an analyst with London-based Celent.

The feature could be used by banks to more efficiently determine when consumers are traveling, so the bank can adjust its own fraud assessments accordingly, Bareisis said.

Today, consumers usually have to phone their bank to alert them of international travel. They could instead use LockByMobile's technology to unlock that country, alerting the bank of their travel, said Bareisis.

Three banks in the Philippines, where Smart e-Money is based, have begun using LockByMobile. BDO Unibank Inc., the largest bank in the Philippines, started providing the card-locking feature (a predecessor of LockByMobile) to its Smart Money app users in 2007. There are 300,000 active users of the Smart Money card and mobile app.

The two other Philippine banks, RCBC and Landbank, plan a full rollout in the second quarter of 2015.

By integrating LockByMobile, banks can significantly decrease their fraud cases, said Villanueva. And while the app could seemingly add a hurdle into the payment process, he said, “the main reason why people don’t shop online is because the fear of fraud, but [with LockByMobile] they feel secure so will shop more online.”

This feature could be especially helpful for decreasing card-not-present fraud, which has risen as more countries adopt EMV chip-card security at the point of sale, said Villanueva. EMV deters only counterfeit card fraud.

The U.S. is one of the last developed countries to migrate to EMV; the liability shift deadline is October this year. Smart e-Money is in talks with several U.S. banks about integrating the lock feature into their mobile banking app, Villanueva said.

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