In a move that may revolutionize the debit card industry's ability to detect and manage PIN-based fraud, Fair Isaac Corp. has formed a partnership with Metavante Corp.-owned NYCE Payments Network LLC to provide device-profiling technology designed to crack down on the illegal use of stolen debit card information.
The technology is based upon Fair Isaac's existing fraud detection model for account-profiling, along with its custom Falcon network models for debit transaction data treatment and comprehensive case and rules management.
The new device-profiling technology promises to detect and stop fraud in real time, during the authorization process at the POS or ATM, and before a loss is incurred on a customer's account.
The technology is able to identify typical, nonfraud transaction patterns for each terminal and then create device profiles that will enable the detection of abnormal, potentially fraudulent transaction patterns on those machines.
Fair Isaac noted that its technology already protects more than 900 million payment cards worldwide. It will now have access to NYCE's network of 280,000 ATMs and 1.5 million POS locations nationwide.
In addition to this new fraud detection model, Fair Isaac will develop a custom Network PIN Debit Falcon system using historical data from Falcon customers worldwide.
Furthermore, NYCE will also leverage its prior investment in Fair Isaac's CardAlert Fraud Manager, which identifies and reports counterfeit payment cards to issuers before they incur losses.
The integration of CardAlert with Fair Isaac's new fraud detection model will reportedly further increase the ability of NYCE issuers to detect fraud, reduce fraud run-time and, thereby, save money.
"The ability to include NYCE device-specific characteristics with account data greatly increases the detection power and accuracy of Falcon fraud scores," said Doug Clare, Vice President of Networks for Fair Isaac.
"This new approach will deliver more than just a powerful fraud detection tool. We believe it will transform the debit network industry's approach to fraud detection and management."
And not a moment too soon. The volume of U.S. debit card transactions has surged over the past few years, with debit cards sustaining nearly 20% annual growth, continuing to outgrow credit card usage.
MasterCard Worldwide-owned TowerGroup Inc., a leading research and consulting firm focused on the global financial services industry, estimates that issuers will experience losses of $2 billion before 2010 unless better fraud detectors are put in place.
With a PIN number, debit cards already have an extra level of built-in security that credit cards do not have.
But, as Clare stated, increasing usage of the debit card "means we have to help our clients stay vigilant to keep consumers' trust in [the debit card's] reliability and security high."
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