MasterCard International Inc. has introduced an enhancement to its fraud-reporting system that is supposed to reduce its members' annual losses by $12 million.
The enhancement, announced last week, is called System to Avoid Fraud Effectively, or SAFE.
It is part of MasterCard's membership protection program, which the New York-based association estimates will in total cut fraud losses by $50 million annually. Last year MasterCard members lost $452 million to fraud. SAFE increases MasterCard's capacity to assimilate data from its members more accurately, to spot trends, and to provide banks with fraud data about other banks.
Since credit card fraud is not a competitive issue, information about how an issuer handles its fraud problems is not proprietary.
Before SAFE, said Vincent DeLuca, MasterCard's vice president of fraud control, issuers did not have access to this shared information.
"Members want to know where they stand with their peers m terms of fraud," said Mr. DeLuca. This information, among other things, helps to determine how much money should be allocated to investigative resources, he added.
Increased Flexibility
MasterCard, which requires that its members submit a monthly report on their fraud activity, tracks nine types of fraudulent card transactions: lost, stolen, never received, fraudulent applications. counterfeit, mail and telephone order, multiple imprints, and "other" (used when an issuer does not know how the fraud occurred).
SAFE allows MasterCard to add up to 100 types of fraud to its list almost immediately. The previous. more cumbersome method would have required months to accommodate a new form of fraud.
SAFE also allows issuers to report fraud data daily, which enables MasterCard to send the issuer a more accurate report at the end of each month.
Faster Notification
Another feature that increases pressure on perpetrators of fraud is SAFE's ability to notify card issuers more quickly when a fraudulent transaction occurs. SAFE is designed to shift the responsibility away from issuers and onto acquiring banks when merchants authorize sales involving fraudulent cards.
Mr. DeLuca is quick to point out that SAFE does not penalize acquiring banks, but it does cause them to confront merchants who have a history of accepting bad cards.
"The acquirer has to accept a certain amount of responsibility for remaining with that merchant," who may be working collusively with a ring of scam artists, said Mr. DeLuca.
When a cardholder reports fraudulent activity involving his or her card and the issuing bank reports the transactions to SAFE, MasterCard checks a list of merchants who account for frequent losses. If the merchant appears on that list, under SAFE, the issuing bank has grounds to ask the acquiring bank to absorb the loss.
The previous system would have taken longer to notify the issuing bank about the merchant, because the list was made available to banks every quarter.
