Visa Offering Smartphone-Tracking Service to Combat Fraud

(Pittsburgh Post-Gazette/TNS) -

Would it bother you if your credit- or debit-card issuer were able to follow you around, using your smartphone to monitor you?

The giant payment processor Visa is getting ready to offer a service that would let it track cardholders to fight fraud and make it less likely that consumers would have their transactions declined while traveling.

The feature, which will be integrated into mobile banking apps, will be ready in mid-April, said Mark Nelsen, senior vice president of risk products at Visa.

Visa is emphasizing that the service will be optional and that customers will be able to disable it at any time. Just how soon cardholders could opt in will depend on when their card issuers sign up.

“Probably by early summer through fall, you’ll start seeing more and more banks offering this capability,” Nelsen said.

Known as Mobile Location Confirmation, the software can use wi-fi, GPS or cellphone towers to locate cardholders, he said.

For the first few weeks after it is initiated, the service will analyze location data to establish a customer’s home territory, within roughly 50 miles.

After that, when a customer makes purchases at the register, Visa will compare the location of the customer’s mobile phone to the location of the transaction, then send a message to the card issuer indicating whether the locations are within the 50-mile home territory.

“If your mobile device is in the proximity of the payment transaction, your issuer can more confidently approve the transaction,” Visa said in announcing the service.

The system is intended to help fight counterfeit-card fraud, the type where hackers steal card data that’s used to make fake cards and run up big bills.

Presumably, if a crook uses a counterfeit card within a person’s home territory, that wouldn’t be stopped by the location-tracking feature. But location isn’t the only factor Visa uses to evaluate a transaction.

“Every time you use your card, we determine the likelihood of fraud on that transaction,” Nelsen said. “We look at up to 500 pieces of data. Location is one attribute.”

For consumers, the biggest advantage to using the tracking service will be when users are traveling outside of their home territory, Visa says.

Cardholders no longer will have to worry about having their transactions declined overseas or elsewhere just because they forgot to notify their card issuer about their travel plans.

If a cardholder takes a flight from Pittsburgh to Florida, for example, the tracking services will know — provided the cardholder brings a smartphone along.

Under existing systems, when customers make purchases outside of their typical buying pattern, such as when they are traveling, transactions may be mistakenly declined. Besides being inconvenient for cardholders, such mistakes mean lost sales for merchants.

The goal is to let more of the legitimate transactions go through.

Visa expects the tracking service will cut the rate of so-called false declines by about 30 percent. It won’t eliminate all false declines because location isn’t the only factor used to approve transactions, Nelsen said.

Visa sought input from privacy advocates before deciding to launch the tracking service. They were “quite supportive,” as long as the feature remained optional and Visa limited how it used the location data, Nelsen said. Visa has said it wouldn’t use the data for marketing or any other purpose except for fraud detection.

Justin Brookman, director of consumer privacy at the Center for Democracy and Technology in Washington, D.C., said he had no major privacy concerns if card issuers made it clear that the service was voluntary and that the data was not used for reasons other than security.

He pointed out that people already provide information about their location when they use their credit or debit card at the register.

“I get what (card issuers) are doing here,” he said. “I understand why they are trying to do more to prevent fraud. I would want to make sure they aren’t doing more with the information, like using it for marketing purposes.”