The credit card associations next month will step up their use of alternative mail systems to prevent card thefts.
Members of MasterCard International and Visa U.S.A. will have the option of using a private courier to deliver cards in areas that might be vulnerable to crime.
"We have the best postal system in the world - it's just a little porous for delivering valuable items," said Allan Trosclair, vice president for fraud control at Visa.
Special Delivery Rate
Having completed overnight-delivery tests, Visa next month plans to offer member banks the option of using Federal Express Co. to areas where customers have not been receiving their cards. The service would cost a little less than $4 per card under a. special rate negotiated by Visa.
MasterCard, which tested its service with a half dozen issuers this year, will allow members to use United Parcel Service to bypass some postal centers and airports. Many of the cards would still be delivered by local mail carriers, on the theory that most thefts occur at the regional processing points.
MasterCard's program, called Secure Delivery, "admittedly lacks some of the security of portal-to-portal" delivery, said Joel S. Lisker, senior vice president of security and risk management. But, in volume, it will cost perhaps one-tenth the Visa overnight delivery charge.
Postal Service Involved
The U.S. Postal Inspection Service has been working with the card associations to identify problem areas. It is proposing that the Postal Service offer an alternative delivery system just like the MasterCard program, a spokesman said.
Private delivery also has been tried by American Express Travel Related Services Co. on its elite platinum cards. Although it is an antitheft measure, American Express also has viewed it as a service enhancement and an opportunity to make direct contact with cardmembers.
Visa said 12 banks shipped 50,000 cards via Federal Express in its three-month pilot program. While 6,000 institutions issue credit cards, 50 account for about 83% of the volume.
A Fast-Growing Fraud
The interception of credit cards in the mail, known as "never received issues" or NRI, is the fastest-growing fraud problem facing the card industry. At last count, criminals were running up about $650,000 a day in advances and charges on cards pilfered from the mail.
"With 300,000 Visa cards [in the mail] every day, you can put your hand in there and pull something out," Mr. Trosclair said.
In the first eight months of 1992, MasterCard estimated that it lost $34 million to NRI fraud, a 79% increase over the 1991 period. Visa said its surveys have shown that about 14 cards per 10,000 mailed never reach their destination.
Visa estimated its NRI losses at $60 million in 1991, rising to a projected $80 million this year.
The average loss on each card from unauthorized cash advances and purchases to finance drug trafficking and other nefarious activity is about $1,600, according to Visa.
Lax Security Cited
"The problem grew overnight," said Mr. Lisker of MasterCard. He cited "a huge reduction in [security] resources" at the U.S. Postal Service as a factor in the problem.
Some issuers have responded to NRI fraud by requiring cardholders to activate their cards with a phone call. The associations said some theft can be avoided by not mailing over weekends, during which bundles of cards sit in one place too long for safety.
MasterCard, which would allow members also to send Visa cards via its alternative delivery system, declined to estimate how many cards might be shipped. A spokeswoman said the objective is to reduce NRI losses by 20%.
Visa said its program provides all the benefits of Federal Express delivery, including computerized tracking and signed receipts. Of the 50,000 cards shipped in the Visa pilot, Mr. Trosclair said, not one went astray.