Card Fraud Crackdown May Shrink Interchange
Chargebacks911 COO, Monica Eaton, is widely acknowledged as an industry expert on card-not-present fraud. As such, the Credit Union Times sought out her input regarding the recent EMV liability shift, which took place in the US on October 1 of last year.
Eaton took the opportunity to reflect on some of the ways in which more frequent instances of card-not-present fraud will impact credit unions:
The risk of fraud and the expense of fraud has become such an issue in the industry that it happens to be the one enemy that everybody has in common…So even the acquirers now are saying, ‘What things are you guys doing on your end to help proactively prevent these types of things?’”
With card-not-present fraud growing fast, it’s not surprising that the pressure is for acquirers to flag potentially fraudulent transactions. The dramatic rise in instances of card-not-present fraud over the last few years also leads acquiring banks to blacklist more retailers.
Now, more and more declined transactions occur as a result of automated, preemptive fraud prevention, and the line of interchange income going to credit union card issuers is under threat as a result.
Cardone suggests that the algorithm-based, automated approach to fraud prevention is too unreliable, turning up far too many false positives to be effective:
How do you predict behavior? It always starts with a trial-and-error process…Unfortunately, you have innocent retailers who become guinea pigs, innocent cardholders who become guinea pigs.”
She continued, explaining that the trends and characteristics of a merchant should not determine whether or not they are associated with fraud. Instead, merchants should be judged based on the particulars of their operation.
It shouldn't be behavior, trends and transactions...It should actually be, how's their fulfillment? Do they answer the phone? How's their operations? How creditworthy the owner is. Is there growth? What about the quality of their product? These are the types of things that you would think logically would score a merchant.”
