I recently came across an interesting fraud prevention technology tool… with a twist on the sales approach.

Finsphere Corp., a Bellevue, Washington security vendor, announced an intention to sell their PinPoint transaction monitoring service directly to consumers.  Today, PinPoint is offered only to FIs. 

PinPoint uses data from mobile phone carriers to determine where a consumer’s phone – and presumably the consumer – is at the time of a transaction.  If the consumer’s phone is detected in one city but his card is being used in a different city, PinPoint alerts the FI to the possible fraud.

Finsphere technology also works for card-not-present transactions, such as online purchases.  It gets a phone’s location data directly from wireless carriers and the financial data comes from the consumers.

Sounds pretty neat, but why sell directly to the consumers? 

Finsphere believes PinPoint will appeal to the type of consumer who pays for credit monitoring services or identity theft programs.  The company plans to test its system and launch broadly in October at a cost of $10-20 per month.    
While I’m not certain consumers will have the drive to take on (and pay for) a monitoring product themselves, it’s an exciting advancement in fraud detection – one I’m eager to learn more about it.

As I have grown older, one of the best parts of the newspaper remains the comic page.  Where else in the paper can you get such a succinct snapshot of life that can be both thoughtful and make you laugh?  I have grown accustomed to skimming a variety of strips.  I don’t look at Blondie very often, but there it was in early July  – a reference that hit home professionally.

In case you missed it, Dagwood is online paying his credit card bill.  He clicks the minimum payment, and the computer message responds with a “that’s it??!?!”  The final screen is Dagwood telling Blondie they need to switch to a more user-friendly card.

As the final pieces of the CARD Act went into effect recently, we have heard many politicians reflecting on the importance of this landmark legislation.  Since the legislation was first proposed, I have spent a great deal of time discussing the impact on credit unions. While this legislation was intended to adjust the behavior of the largest issuers, the bill of “unintended consequences” has dramatically impacted the rest of us who have always understood that cardholders were real people who deserved access to a fair yet competitive credit card.

As credit union organizations, we have an unprecedented opportunity to grow and serve a larger member base.

Reading the comic was an opportunity to reflect once again about this opportunity.  The CARD Act was meant to change the way card issuers do business.  Already the media are complaining that little has changed and that issuers have found loopholes.  Of course they did – this is a business with large dollars at stake.  In one case, an issuer has announced an expected loss of $600 million due to the CARD Act.  It is unlikely they will shrug their shoulders and say “oh well.” 

We expected a dramatic response from the large national bank issuers, and we have not been disappointed. Rising rates, the introduction of new fees and the disappearance of card features and benefits are just some of the changes. Some issuers are even saying they will no longer offer credit to consumers they perceive to be moderate to high risk – the same people they aggressively targeted 12 short months ago.

But what are credit unions doing?  Complying with the letter and the spirit of the law.  But that wasn’t much of a stretch – Congress enacted the CARD Act so issuers would provide consumer-friendly products.  They just didn’t look hard enough at their constituent-base to realize that there was already a solution out there – credit unions.   Sure we have a lot of compliance issues to work through, but we are still providing a product that members can trust.

So why does this bear repeating?  We certainly have talked about the opportunity enough, but it doesn’t look like we are making any great strides in market share.  Look at the Credit Union Times website – the most read story for the past several months has been “Warning to CUs, Big Bank Issuers Targeting Your Best Members Again.”  Are you worried?  Are you doing anything about it?

You should be.  Look at your program.  How can your processing partner help you build a better, more effective program by taking advantage of the tools they have available?  If you don’t, can you find a partner who has the expertise you need to ensure your membership, and your potential membership, have access to a fair, competitive program with an attractive rate and rewards program?

And, don’t wait because there really isn’t much time left.  Consumers are up in arms about the unfair practices of the largest issuers now, but there is plenty on the horizon to distract them.  Take advantage of the opportunity to demonstrate the credit union way – a user-friendly solution.

So much of fraud prevention comes down to communication. Are you communicating security tips to your cardholders? Are they communicating travel plans to you? Is your FI listening to and talking about the latest threats?

With so many different communications tools at our finger tips, there exists plenty of opportunity to educate cardholders on good security behavior. We have mail, e-mail, text messaging, Webinars, social media sites and good old-fashioned face-to-face conversations at our disposal – many of which are inexpensive to implement.

Using these tools for education is only one opportunity. Using them to stop fraud in its tracks is yet another.

Take mobile alerts, for example.

If the FI sees a suspicious charge, it sends a text. Likewise, cardholders are able to review the transaction and report back whether it’s legitimate – all in the push of a few cell phone buttons.

Not only do mobile alerts keep the FI and the cardholder talking, it puts the power of fraud prevention directly into the cardholder’s hands – or rather, his handset.

We are right now putting this exact practice into play with TMG Mobile Transaction Alerts for cardholders carrying Visa credit and debit cards issued by our credit union and bank clients.

It’s just one of the ways cardholders and FIs can communicate to shut down fraudsters who prey on those who don’t.

With all the talk about mobile payments, online banking, ATM optimization and person-to-person transactions, it might be tempting for financial institutions to let branch locations slide down the priority list.

But recent research indicates this may be a big mistake. That’s because many people still prefer to do their banking in person.

This is particularly true for transactions that consumers deem too complicated for mobile or online applications, such as large credit decisions, refinancing and investment opportunities.

Nearly 70 percent of respondents recently polled by IDC Financial Insights said they visited a branch between one and four times per month. That kind of traffic represents an outstanding sales and marketing opportunity – one on which credit unions and banks must capitalize.

As the popularity of online micropayments increases, so too does micropayment fraud. This represents a massive problem, primarily because it’s nearly undetectable.

Why is it undetectable? Because micropayment fraud is just that – micro, flying under the radar of individuals and their FIs.

This summer, the FTC busted an international identity theft ring that had gotten away with their scheme for years. The thieves relied on dummy companies and money mules to cover up fraudulent charges of less than $10 from more than a million credit cardholders. 

What’s particularly troubling for credit unions and banks is that online micropayment fraud represents low-dollar, card-not-present fraud.That means there are no chargeback rights for card-issuing FIs.
These small-dollar losses represent a large trend, one with the potential to cost FIs millions of dollars if not properly policed. FIs should be on the look out and set their fraud strategies to account for this increasingly popular plot.

Anytime a new technology comes onto the scene, you begin to hear predictions of when the solution will go mainstream. How long until this technology erupts and what will enable that to happen? Only analysts know.

Among advances in the payment industry, mobile coupons appear to have hit the mainstream milestone, as Target has recently introduced them to millions of U.S. consumers.

Target customers who sign up will receive the coupons via text message. A bar code on the consumer’s smartphone screen is then scanned at the checkout. Easy enough.

According to USA Today, another “mainstream” retailer, J.C. Penny, is about to rollout a similar set up for its customers. Starbucks, too, is getting in the mobile payments game with QR codes, which display on customers’ iPhones and work as virtual gift cards. 

While these retailers will undoubtedly learn lessons and make mistakes as they introduce a “still-new” technology, they have the potential to be trailblazers in the minds of their customers.

What payment technologies have piqued the interests of your cardholders, and how can you leverage emerging solutions for capture of new and existing business?

I read an article recently suggesting that card issuers today are facing a difficult choice when it comes to rewards. The article presented the following choices.

A) Design a rewards program that makes it easy for cardholders to cash in their points.

B) Make the customers jump through hoops to get their perks.

For our clients, the choice is pretty clear. When it comes to strategy, the financial institutions who offer TMG-managed rewards make it simple for their cardholders to rack up and redeem points.

Not only does a user-friendly rewards program generate valuable word-of-mouth marketing, it inspires cardholder loyalty like no other program can.

And isn’t that loyalty the ultimate goal?

This month, TMG is rolling out a brand new look for our exclusive ATIRAgift card. The former purple plastic has been replaced by a striking white card with a vertical orientation.

The reason for the change was three-fold:

1) New CARD Act regulations required that we modify some of the existing verbiage visible on the plastic;

2) our clients and their gift card buyers needed a way to more easily distinguish between compliant and non-compliant plastic; and

3) TMG is always looking to set its products apart in the marketplace.

Here’s an image of the new ATIRAgift card:

As always, ATIRAgift remains a customizable prepaid product, so our FI clients can still design their own look and feel without losing any of the benefits of the ATIRAgift brand.

Nearly 40 percent of the credit card hacking cases last year occurred inside the hotel industry. This figure puts hotels well ahead of financial institutions (19%), retail (14.2%) and restaurants/bars (13%). 

This summer, Destination Hotels and Resorts, a chain of luxury properties, notified customers that credit cards “may have been compromised.” Likewise, Wyndham Hotels told customers that a sophisticated hacker had penetrated their computer systems at as many as 31 hotels between November 2009 and January 23, 2010. Unfortunately, this isn’t the first time the Wyndham Hotel chain has been hacked.

Why are fraudsters so drawn to hotels? Simply put, it gives them the biggest-bang-for-their-buck, or in this case, their “hack.”

That’s because hotels are notorious among hackers for their large and insecure collection and storage of credit card data. Economic hardships in the travel industry have forced cutbacks in security spending, which has only made the situation worse.

What’s more, the cardholder victims are often busy business travelers who don’t regularly check their statements for unusual activity, giving hackers months to clean up their tracks.

FIs can help minimize fraud by supporting the improvement and enforcement of security procedures at the merchant level. Educating travelers on personal security tips is another area that FIs can devote time and effort.

Putting forth the effort to help merchants and travelers will pay off, as all too often, it’s the FI stuck with the bill.

Everywhere you look today, there are paperless options. The Apple Store emails you a receipt of your in-store purchase; Wells Fargo does the same at the ATM. Even iPhone and iPad users can turn their devices into POS swipe terminals capable of emailing receipts complete with GPS coordinates of the sale.

Of course, nearly every major credit card issuer can provide paperless statements.

It’s easy to understand the upside of paperless for the issuing company or FI. But what about consumers? How do you best introduce the concept to your cardholders?

Before carving out a strategy behind the migration of your cardholders to paperless statements, you should first understand their perceptions with regards to electronic communications.

• Have they embraced green solutions and consider paperless statements enviro-friendly?
• Are they confident in the security of their information once electronic?
• Will paperless statements allow them added convenience when it comes to budgeting and bill paying?
• Do they expect to pay for paper statements?

To give you an idea of the mindset of consumers happy to use electronic statements: Sixty two percent of those who went paperless did so because of ease of use. Half did so to reduce clutter, and another half to eliminate paper waste. (This from PayItGreen).

However, these statistics are just that. Your FI’s cardholders are unique to your institution. Conducting research specific to your community is going to be the best way to determine your cardholders’ feelings on the subject. Only then can you truly know how to proceed.