As consumers get more comfortable letting companies know the location of their mobile phones, U.S. Bank sees this as a good way to fine-tune its fraud management.
This month the bank rolled out its Geolocation Service. Developed by Visa, it is an opt-in offering integrated into U.S. Bank's mobile apps that matches the credit card's location to that of the customer's phone. The aim is to do more to ensure transactions on customers' cards are approved when they're out of town, minimize disruption and reduce the risk of fraud.
A smartphone's "location is pretty mainstream in terms of being able to utilize it. The question is what you do with it," said Dominic Venturo, U.S. Bank's chief innovation officer.
U.S. Bank's earlier work in geolocation has been around customer service, such as providing ATM and branch locations or hours of operation. But that is just a sliver of what other sectors do. Retailers uses mobile and geolocation for marketing schemes, like automated check-in or to remind customers if they have a loyalty card they can use, for instance.
"Financial institutions may be well behind the curve as an industry," Venturo said. "We started with credit where credit and mobile intersect. We had an interesting problem to solve, it's a common occurrence," he said of transactions declining when customers leave town.
Customers with U.S. Bank FlexPerks Visa credit cards can opt-in through the FlexPerks mobile app. It's also available through the Elan partner financial institutions through the Elan mobile app and will be made available via the U.S. Bank mobile app at a later date.
There are other ways to harness location technology in financial services. For example, Citigroup is testing Bluetooth beacons in a pilot that gives customers cardless access to branch ATMs after business hours; Wells Fargo is testing location-based services to identify people as they walk into branches, greet them personally and offer them quick help; and Capital One is experimenting with sending people offers from local merchants as they walk or drive by their shops.
But more similar to U.S. Bank's service, San Antonio Federal Credit Union's Card Control app lets members limit spending by location, giving the user full control within the app. Westpac has launched geolocation services targeted at international travelers to prevent the inconvenience of transactions in a foreign country being blocked; and MasterCard has been testing technology to authenticate card transactions based on the proximity to the phone to enhance security.
The notion of correlating a credit card with the location of its owner is a particularly great idea for the U.S. market, where most consumers have not moved from magstripe cards to chip cards, said Sanjay Srivastava, chief digital officer at the consulting firm Genpact. By contrast, chip-and-PIN authentication has been the standard in Western Europe for quite some time.
"You get something for giving something," he said. "As a consumer, everyone wants my geolocation to push me ads and coupons and other stuff. As a user I can actually get a real value benefit either as reduction of fraud or decline of transactions … This is a great way to approach the personal privacy and value exchange discussion."
Geolocation has powerful fraud-fighting capabilities, said Zilvinas Bareisis, a senior analyst at Celent, and it could begin to play a bigger role in fraud management, but organizations would have to be sensitive to "the creepiness factor."
"They've given you permission, but depending on how you're using it, some customers might find it disturbing and some will find it very valuable," he said.