There's No Place for Fraud for the Holidays

Nov  26 
Patrick Davie  Vice President, Product Strategy, Card Services, Fiserv 

Consumer education, mitigation tools can ensure a happy shopping season

The holiday season is often the most wonderful time of year for consumers. But for financial institutions, it's also a time to be wary of the breaches, identity theft and fraud that ramp up during holiday shopping.

Each year, card fraud expands with increased holiday shopping at malls, through catalogues and on websites. Options for payments are now expanding too, through cards, phones and watches as well as with online technologies and contactless payments. Protecting those payments during the holidays is increasingly more difficult and complex.

No matter the season, financial institutions are right to be wary of fraud. According to a 2018 Federal Reserve report, for every $10,000 of payments in 2015 and 2016, credit card fraud increased from $16.95 to $17.13, and debit card fraud decreased from $9.61 to $9.15.

So what can your financial institution do to keep the holidays happy for everyone except fraudsters? Here are five tips.

1. Remind Accountholders of Seasonal Fraud Trends

Warn cardholders about scams that tend to be more pervasive during the holidays.

For instance, there may be no place like home for the holidays, but that means high travel volume at airports, train stations and highways. However they travel, consumers should beware: Fraudsters are constantly on the prowl, and consumers need to protect their phones, physical wallets and travel accessories.

Consumers' generosity also makes them a huge target for fraudsters, and holidays are a peak time for charitable giving. When consumers are unfamiliar with a charity or don't recognize the phone number or email address of the solicitor, let consumers know it's fine to withhold contributions until they've thoroughly vetted an organization.

Account takeovers also are a threat throughout the year. When fraudsters gain access to key details of a user's accounts, they can pose as the real customer and change account details, make purchases, withdraw funds or use stolen information to access additional accounts. Even during the busy holiday season, remind accountholders to continue to regularly monitor their accounts and spending.

Proactive approaches, prudently implemented, can help you defend your financial institution and cardholders, ensuring the holiday season is merry for everyone.

2. Encourage Accountholders to Help Themselves

The first, and frequently best, line of defense against fraud is an engaged and proactive consumer.

In addition to advising cardholders to be attuned to seasonal fraud trends, remind them to:

  • Keep an eye on their money by monitoring what's in their account and their wallet
  • Safeguard their Social Security numbers, personal identification numbers, passwords and other identifying information tied to accounts or cards
  • Be cautious when using remote terminals or kiosks such as pay-at-pump gas and standalone ATMs.

3. Review Your Risk Rules

Remember to make annual adjustments to your scoring model to account for the changes in consumer spending during the holiday shopping season.

In particular, try to reduce the number of false positives that result when a valid transaction is denied. Intelligent, data-driven technology can help achieve that balance between fraud protection and friction. The objective is to optimize the consumer experience by maximizing cardholder approvals.

According to a Fiserv study of its card clients, when cardholders' purchases are falsely denied, 20 percent will stop using that card.

4. Set Your Program Controls

Transaction authorization controls are the fundamental building blocks for effective processing. Setting appropriate parameters will enable you to provide a reliable consumer experience and maximize risk reduction.

Transaction limits identify the maximum dollar amounts allowed for specific transaction types within a given period. Review your limits for cash and purchasing activity based on a consumer's spending profile. Defining appropriate amounts will help keep consumers happy while safeguarding against card abuse.

Consumer spending velocity defines the maximum number of times a card can be used for ATM, point-of-sale and cash-equivalent transactions within a specified time. Remain nimble by adjusting your velocity limits for individual consumer use patterns and the holiday spending season.

5. Review and Implement New Products and Services

New fraud tools can help you balance mitigation with positive customer experiences. Here are some examples:

Card Controls and Alerts: Give your cardholders the ability to receive transaction alerts and actively manage their debit and credit cards through a mobile banking app. Enabling cardholders to define when, where and how their cards are used can drive front-of-wallet behavior and support an improved experience.

Fraud Warning Services: Relying on payment networks for alerts about data breaches and compromised cards may cause costly delays and reduce cardholder satisfaction. New warning services can notify you weeks before a network alert and can pinpoint small and local compromises not normally investigated by the networks. With those added services, you likely can uncover compromised cards earlier.

Risk Exemption Services: Often, if a consumer uses a debit card to make an uncharacteristic purchase, it can generate a high fraud score and trigger a declined transaction. The consumer could then receive an alert seeking transaction validation. The validation closes the alert, but without an automated risk exemption service, the same transaction using the same card will go through the same risk applications and could be denied again.

The consumer then must either use a different card or call you to resolve the problem – an inconvenience in either case. With an automated risk exemption service, after an alert is closed as no fraud, an exemption can be automatically placed on risk applications and rules, allowing the consumer to complete the transaction without additional intervention.

Texting: Automated voice and email notifications regarding suspicious activity may be missed or ignored. Instead, consider texting, which adds more convenience and helps consumers confirm fraud sooner. Their real-time responses can prevent payment disruption and minimize fraud exposure.

Tokenized Transactions: Encourage adoption of digital wallets that leverage tokenized transactions. They're often safer than traditional card-based transactions because transmitted data is hardened via encryption methodologies.

Keep Your Holidays Merry

As the scale and frequency of fraud evolves, be ready to evaluate and implement risk management processes that help you find the right balance between mitigation and a hassle-free consumer shopping experience.

Proactive approaches, prudently implemented, can help you defend your financial institution and cardholders, ensuring the holiday season is merry for everyone.