CashEdge Inc. says that demand for its account-to-account transfer service has grown sharply in the past year, and that increased transaction volume makes it easier to weed out fraud.
Bankers typically use the New York company's electronic money transfers to fund accounts that are opened online or to allow customers to transfer money to and from accounts at other companies.
CashEdge has more than 600 financial clients, including Bank of America Corp., Citigroup Inc., and Wachovia Corp.
The vendor is expected to announce today that the dollar value of its transfers quadrupled last year, to over $38 billion. Last week the company said that the number of transactions also quadrupled last year, though it would not provide the exact number.
CashEdge assumes the liability for all transfers — if a bogus one goes through, it must reimburse the bank — but the vendor says the data it gets from having so many clients and transfers has made it much easier to spot and prevent fraud.
Amir Sunderji, the vice president of risk management and payment services for CashEdge, estimated that the growing amount of transaction data is allowing the vendor to catch 40% more fraud attempts than it did when the transfers were launched in 2001.
In some cases, the vendor has spotted fraud faster than its clients, he said. "We have actually informed some of the larger banks that we support before they even became aware" of incidents.
Part of the reason for CashEdge's improved fraud detection is that as consumers have become more comfortable moving money online, it has become clear what a typical money transfer looks like — so the bogus ones stand out even more, he said.
Also, by serving clients at both ends of the transaction, CashEdge can detect subtle details that may not be obvious when looking at only one side, Mr. Sunderji said.
Compromised account details often are sold online, and often to multiple buyers, he said, but the fraudsters may change some of the information to avoid detection. If thieves open an account with a different address from the one on file with another bank, for example, CashEdge can spot that, he said. If a dozen accounts at a dozen institutions start initiating transfers from computers at the same Internet Protocol address, CashEdge can see that, too.
CashEdge also uses IP geolocation, which picks apart the IP address to determine a computer's location they a phone call can be traced looking up the area code, Mr. Sunderji said. The process helped it stop the "Bulgarian blunder," an attempted to transfer $98,000 using a computer in Bulgaria.
That example is actually an extreme one, he said, since most institutions limit the dollar value of transfers. In practice, the amount is not the most telling variable in determining whether an account has been compromised, he said. CashEdge has observed attempted fraudulent transfers worth as little as $1,000, and the average one is worth between $3,400 and $5,000.
Brian McGinley, Wachovia's loss management director, said the Charlotte company is pleased with CashEdge's ability to catch fraud.
"I don't know that this product could exist effectively without a capability like this," he said.
Tracy Paonessa, who manages Wachovia's online fraud prevention team, said her team benefits from sharing data with CashEdge.
"They have access to information that we don't have access to, and then we may have some information that they don't have access to, so it's a good partnership," Ms. Paonessa said.
Wachovia has used CashEdge's account funding service for two years and began using its transfers in September.
Avivah Litan, a vice president and research director at the Stamford, Conn., market research company Gartner Inc., said that fraud detection is the key selling point of CashEdge's services.
"CashEdge has more expertise in detecting fraud than in moving money, because it doesn't take that much expertise to do a fund transfer," she said.
Many banks could have developed account funding and transfers on their own but held back, because of concerns over fraud, she said. "There's just been an increase in payment transfer fraud, from what I'm hearing," and that touches all types of accounts, including corporate ones that typically have better security than consumer ones.
There is a high demand for stolen account data, she said, because once fraudsters have enough information to get into an account, it is not hard to move money out. "If there's not good fraud detection, it's pretty easy to get away with if the authentication fails."
