Visa Europe is implementing ValidSoft Ltd.’s fraud-prevention technology, which uses the location of a consumer’s mobile phone to help prevent credit and debit card fraud, the card brand announced late last month.
The card company will use ValidSoft’s Valid and Valid-POS fraud-prevention systems, which work together to provide card-fraud detection and card authentication, Pat Carroll, ValidSoft CEO, tells PaymentsSource.
Visa Europe declined to comment on the new service beyond what it noted in a news release.
The technology detects whether a consumer’s mobile phone is in the same location as the merchant or ATM where the consumer’s card is being used, Visa Europe noted in a news release. Participating issuers using the service contact cardholders via a phone call if they detect a possibly fraudulent transaction, Carroll says. Otherwise, the process is “entirely invisible to consumers,” he explains.
The location-based system is especially beneficial to banks because “nine times out of 10, banks think a credit card transaction is fraudulent,” Carroll claims. Identifying “false positives” is very costly for banks, and oftentimes there is no resolution, he adds.
Additionally, banks may better protect their customers but still maintain the customer’s privacy, Carroll says. “Only the bank knows where the consumer is located,” he says. “We just query the global mobile phone network and never view a cardholder’s card information.”
The service, which banks provide to their cardholders for free, does not require consumers to download an application, and it works with any mobile phone, Carroll says. Banks may market the service to their customers and give them the ability to opt out if not interested, he notes.
Banks pay ValidSoft a fee based on volume plus another fee each time Ireland-based ValidSoft queries the network, Carroll says, declining to comment on the exact fee amounts.
Tying fraud prevention to mobile phone location services is definitely “a compelling concept,” says Gwenn Bézard, a senior analyst with the Aite Group LLC research firm in Boston. When consumers are victims to card skimming, banks usually have no idea when fraudulent transactions subsequently will occur, he adds.
Most consumers carry their mobile phones everywhere, which enables banks to notify cardholders immediately when a possibly fraudulent transaction is detected, Bézard says.
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