Recent articles have suggested CU members face a greater risk of fraud when using their debit cards than credit cards. Based on our experience in providing fraud protection services for more than one-billion credit card and debit card transactions annually, we continue to believe that debit cards provide members with a safe, convenient way to make purchases and pay bills.
Credit unions need to educate their members about the fraud protection offered by both credit and debit cards. Statements that question the safety of debit cards could lead our members to use more costly, less-secure payment solutions such as cash and checks.
Emphasizing the safety, convenience and control debit cards offer is especially important right now, since activation, penetration and usage rates continue to rise due to consumer demand. As a result, debit cards have become an important contributor to non-interest income and deliver a substantial boost in profitability.
As an issuer of 14 million debit and credit cards, PSCU Financial Services can prove that increased security features and aggressive loss-management techniques are lowering the risk associated with fraud on a year-over-year basis. Our cooperative's fraud-to-sales loss ratio currently stands at a very impressive .038 basis points (combined credit and debit) for our member-owners. At this level, there can be no question that the benefits of these cards greatly outweigh any risk of fraud.
Benefits To Communicate To Members
• Cardholders have zero liability for fraud. Issuers of Visa- or MasterCard-branded debit cards cannot hold consumers responsible for any reported fraudulent activity. Any fraudulent activity will be immediately refunded. In fact, the Federal Reserve's Regulation E requires that any error be corrected within one business day of determining that an error occurred. Dollars used for fraudulent purchases are immediately inserted into a member's account.
• Card value validation (CVV) and card validation code (CVC) / better known as 'security code' to most consumers, reduce the risk of counterfeit cards by enabling the use of MasterCard's CVC or Visa's CVV encoded on the magnetic stripe of the card as part of the authorization process. PSCU-FS also offers CVV protection for debit transactions that are processed through any PIN network.
• Lost/stolen/fraud reporting is available around the clock so members can report lost/stolen cards, suspected fraudulent activity or verify questionable transactions.
• Advanced fraud detection systems employ advanced neural network technology to examine each incoming authorization in real-time. This allows issuers to identify potentially fraudulent activity as it is occurring and to take immediate action. Most neural networks also include a merchant profiling feature and industry-standard consumer profiles.
• Verified by Visa/MasterCard Secure online services provide real-time verification of a cardholder's account ownership during an online payment transaction, creating a safer and more cost-effective e-commerce solution.
• MasterCard and Visa cards share the same dispute protections. A member who has properly documented the transaction can be assured of the credit union's ability to get their money returned from a merchant in the case of non-receipt, defective or returned merchandise. In addition, using a debit card to reserve future travel will protect the cardholder in case a travel agent or carrier goes out of business prior to the trip.
Additional Safety Features
In addition, fraud protection services like CardLock help prevent unauthorized transactions. A phone call to a secure automated system or a visit to the CardLock website is all it takes to enroll an account and to lock and unlock their credit or debit cards in just seconds, and cardholders will receive notification from the fraud department any time a transaction is attempted on a locked account.
Our cooperative also offers a card not present (CNP) threshold that protects against unauthorized MO/TO for Internet transactions by establishing a maximum number of CNP transactions within a given time frame. In addition, a card value (CVV/CVC) denial threshold helps prevent widespread attacks. Card value denials are monitored and counted based on each credit union's selection of number of denials and number of calendar days.
As Gen Y and Gen Z consumers begin to outnumber Baby Boomers, their unique preferences will shape the direction of payment products. They are more comfortable with electronic channels and are more likely to use debit cards, and CUs need to be ready to serve their needs and preferences.
It's essential to communicate with all members that advanced fraud detection and prevention technologies are being used to protect their cards against fraud. Cardholders should continue to enjoy the convenience of using their cards knowing that their financial assets are protected from unauthorized use.
Tom Gandre is chief debit officer with PSCU Financial Services, St. Petersubrg, Fla. For info:
