HNC Software Inc., one of the country's largest suppliers of neural networks to financial institutions, has continued to broaden its base internationally, signing a multiyear contract with Canada Trust Co.
The London, Ontario, trust company will install HNC's neural network-based system - called Falcon - to help reduce fraud in its credit card division. Although HNC has contracts with financial institutions in the United Kingdom, Germany, and the Netherlands, this is the San Diego-based software company's first Canadian customer.
"Credit card fraud is a serious and growing concern in Canada and throughout the industrialized world," said Laurie Wiles, the vice president of credit card services at Canada Trust, in a prepared release. "Falcon is considerably faster, more comprehensive, and more powerful than anti-fraud measures currently used in Canada."
The neural network technology employed by Falcon gives the client-server based system the ability to discern patterns and, in effect, learn which transactions most clearly characterize fraud.
These advanced systems have been embraced by some of the largest American credit card issuers, including AT&T Universal Card, Household Credit Services, Colonial Bank, and First USA Bank. The system monitors more than 70 million credit card accounts for 24 U.S. card issuers. HNC says that Falcon has been proved to reduce fraud losses by 20% to 30% over other fraud-detection techniques.
Although Canada Trust is a mid-size issuer by its own national standards - holding less than one million accounts - the seven-year contract represents a significant international expansion for HNC, according to Lee Martin, the company's vice president for payment systems.
Since credit card fraud in Canada is different from that in the United States - counterfeiting started there earlier and the number of authorizations is much lower, Mr. Martin said - the Falcon system was adapted for Canada Trust's needs. Counterfeiting accounts for 50% to 60% of Canadian credit card fraud losses, he added.
Clearing to Be at Day's End
Unlike most U.S. issuers, the Falcon system at Canada Trust will handle clearing at the end of the day rather than on an immediate, on-line basis.
Although authorizations still only hover around the 30% to 50% mark and the telecommunications systems are not as sophisticated as in the United States, Mr. Martin said the use of Falcon technology is expected to draw Canadian card issuers into a more advanced, real-time environment.