Hire Your Customers to Detect Fraud

Reduce Costs by Empowering Cardholders to Address Fradulent Card Activity

Fraud management solutions must bring credit and debit cardholders into the process of identifying and resolving card fraud. When a suspicious transaction occurs, an automated solution should notify the cardholder immediately, authenticate the cardholder's identity, ask if the transaction is legitimate, and then inform the card-issuing bank of the cardholder's response.
 
Solutions can contact the cardholder by voice, text, e-mail or a combination of those channels. The cardholder could receive the communication as a call, e-mail or text message on a mobile phone, an e-mail to a computer, or a call on a telephone landline.
 
Cardholders benefit because the solution contacts them the way they want to be contacted and immediately brings them into the fraud detection process. The card-issuing bank benefits because the automated solution reduces contact center costs, accelerates fraud resolution, and limits the bank's risk.
 
This article provides information on card fraud and how interactive multi-channel communications can help card-issuing banks address the problem of resolving card fraud effectively, while reducing expenses and building customer loyalty.
 

Card Industry Overview

Worldwide, the top card issuers are handling 99 billion credit and debit card transactions annually. The United States accounts for more than half of those exchanges of value, topping 56.4 billion transactions each year.1

To stay at the pinnacle, Americans have increased their use of cards 24 percent since 2003. Some 576.4 million credit cards and 507 million debit cards were in circulation in the U.S. by the end of 2009,2 and the average American cardholder had 3.5 cards by the end of 2008.

Identity fraud costs Americans an estimated $54 billion annually and continues to grow as debit and credit card transactions increase. In fact, more than 11 million U.S. residents fell victim to the crime in 2009, up from 10 million a year earlier. One contributing factor to the increase, the careless use of social networking sites, willingly exposes personal data to the prying eyes of criminals.

Meanwhile, in England and Wales, victims of card fraud recently increased 40 percent in a single year to more than 2.4 million. Credit and debit card fraud, which cost the United Kingdom's banks £440 million last year, is rising quickly even though fears of a recession-induced crime wave have failed to materialize. 5 At the same time, card fraud has become three times more likely than burglary in the UK, and 6.4 percent of UK cardholders fell victim to fraud in 2008-2009, up from 4.7 percent the previous year.
 

What Banks Require
 
Because banks offer consumers zeroliability protection, financial institutions are absorbing the loss of funds stolen through card fraud. With the increase in card fraud, issuing banks need to reduce their exposure to risk and accelerate fraud resolution at a lower cost. Relying solely on cardholders to find fraud on statements takes longer and causes costs for the card-issuing banks to soar.
 
Banks are challenged to resolve fraud earlier while managing customer experience, costs and process. Early detection enables banks to prevent additional transactions, thus limiting further liability.

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