ST. PETERSBURG, Fla.-The speed at which fraudsters attack and alter their tactics is changing the game in card fraud prevention, making real-time monitoring much more essential.
But in addition to neural networks and behavior analytics that help detect fraud as it occurs, what's growing in importance is the role credit union staff play in partnering with fraud prevention vendors.
CU employees are stepping up to play a bigger part in stopping crime, card processors told Credit Union Journal, as employees work weekly-if not daily-with vendor fraud teams to share member behavior details and suspicious activities surrounding their card portfolios that only they can glean. That additional information, processors say, makes a real difference in effectively altering and improving fraud monitoring strategies to stop crooks.
"Fraud is becoming much more dynamic and it's happening at greater speed," said Steve Ruwe, chief risk officer for PSCU. "The ante has been raised, you will be impacted faster than you were in the past and the variation on the types of attacks is much greater. In the past you might have had a week to make adjustments when a fraud trend was spotted, now you are often looking at making remediation steps within hours."
Ruwe said PSCU's fraud prevention efforts are more effective when the credit union takes an active role in partnering with the service provider. "The tools we provide credit unions are the starting points. You have to have the proper human capital in both experience and, frankly, perspiration."
Time To Read Up
Teamwork will become even more necessary as the rate of fraud increases, insisted Connie Trudgeon, VP of operations for Co-Op Financial Services, Rancho Cucamonga, Calf. "Stealing is what fraudsters do. It's their job. It's only going to get more rampant and more severe. Credit unions themselves have to stay vigilant as to what is going on in their markets, read as much as they can about fraud trends and prevention techniques, and have the internal expertise to understand what is going on within their own card portfolio."
That complements real-time monitoring solutions Trudgeon said more credit unions are turning to. "The card hits are coming more often and in higher-dollar amounts. So it has become much more imperative to be able to deny a transaction at the point of purchase. We will often make adjustments to rules on the hour. And the credit unions that do the best with this are the ones that actively participate with us."
John Snodgress, security risk manager at BECU in Tukwila, Wash., said the sophistication of criminals has reached a level where the CU is now partnering several times a week, if not daily, with CO-OP-which provides the $9.5-billion CU with its real-time Falcon Fraud Manager system. "It had to happen. Criminals have become so adept that the vendor/credit union relationship had to change to a partnership."
That close working arrangement has BECU coordinating with CO-OP to make regular "tweaks" to its fraud controls. "For example, we might have an alert in place that has been effective at preventing a certain type of fraud common in specific countries," said Snodgrass. "Then, if all of a sudden we see fraud from a country not included in the alert, we immediately work with CO-OP to include that new country in the alert."
Being able to make changes to fraud strategies on the fly also improves cardholder service, insisted Snodgrass. Before instituting a rule change BECU runs an "estimator" to see how many cardholders will be affected and makes rule implementation decisions based on how many members will be impacted.
Working with the vendor to make quick rule changes and pinpoint fraud-prevention efforts, Snodgrass said, allows BECU to monitor a fraud trend instead of immediately blocking and reissuing cards, which the credit union does not like to do.
Need For Rules
A good partnership also demands that clear rules exist on how the credit union and service provider partner, said PSCU's Ruwe. If a CU uses an outside resource and ties their hands and doesn't allow them under certain parameters-such as on weekends when the credit union is not open-to make decisions on their own, fraud prevention won't be as effective.
"You need to give your partner the ability to be flexible and nimble. It boils down to completely understanding the capabilities of your outside resource and then empowering them properly to help you."
