Credit card fraud is an intensely serious subject at Citicorp, on par with marketing, a senior executive of the largest credit card bank said recently.
Whatever strides Citibank makes in attacking the industry's billion-dollar scourge, all banks benefit, because credit card fraud is a noncompetitive issue.
The subject came up at the Faulkner & Gray credit card conference in San Antonio two weeks ago, when Arthur T. DesLoges, Citibank's director of bank card fraud in the United States, discussed the bank's anti-fraud strategy.
In a more recent interview, Mr. DesLoges amplified his remarks, including the latest wrinkle in Citibank's efforts to enhance the security of its cards.
Since early this year, Citibank has been testing a new technique with Visa U.S.A. that would aid in card authentication by adding a number to the magnetic stripe.
The British-developed technology, called Watermark Magnetics, has never been tested here but is in use in Sweden and Canada. Two British banks, National Westminster Bank and Barclays Bank, are testing it.
Visa and MasterCard International are working collaboratively to use the Thorne EMI Ltd. technology, which is aimed at preventing card duplication.
Essentially, a code of numbers is embedded in the magnetic stripe, arranged in a random pattern like a water mark. A Visa spokesman likened the code to a serial number, because each card is assigned a unique identity.
Watermark Magnetics is a concept similar to Visa's card verification value, or CVV, and MasterCard's card validation code, or CVC programs, said Mr. DesLoges.
A Visa spokesman said the Watermark product would complement CVV and CVC, which are used to determine whether the information in a card's magnetic stripe has been victimized by tampering.
Watermark technology, though, provides more protection than CVV and CVC, because those codes can be duplicated by a scam artist with the right equipment.
The Citibank test, involving only the bank's employees, may determine whether a national rollout will occur.
'A Lot of Questions'
Other fraud prevention technologies that Citibank and the industry are exploring include fingerprinting, retina scanning, and voice recognition.
Finger and retina scanning would require a consumer to come into a bank facility to provide the personal body identification information.
"There are a lot of questions and negatives concerning these technologies," said Mr. DesLoges, referring to the intrusiveness of capturing such data.
Both types of scanning are currently being used in high security environments, but Mr. DesLoges expressed doubts about their acceptance in the credit card industry.
Voice scanning, however, has a more promising future, because it can be accomplished over the telephone. Issuers would ask their cardholders to state, for example, their account numbers, which would be recorded and repeated at the time of authorization.
Citibank is currently conducting a test of this technology, said Mr. DesLoges.
Voice scanning is aimed at preventing the kind of fraud perpetrated when a scam artist impersonating the cardholder asks the issuing bank to change the billing address, and so on.
"Fraud losses used to be seen as just the cost of doing business," said Mr. DesLoges.
But that mindset quickly changed when Citibank noticed a 100% growth rate in losses from 1989 to 1991.
"We have since tripled our investment in terms of fraud-detecting technology and in experienced staff," said Mr. DesLoges.
One of the hallmarks of Citibank's war on fraud is the photo card, which features a picture of the cardholder on the front of the credit card.
The consumer press, however, has criticized photo cards for being gimmicky, and too dependent on the retail clerk's taking the time to make a proper comparison.
Mr. DesLoges argued that it is still too early to measure the effectiveness of photo cards, because so few issuers are offering them that merchants do not perceive the photos as a standard security feature.
Also, he said, photo cards reduce the street value of stolen cards, which can be as high as $200. "We do know that what criminals fear most is arrest," he said, "and that that chance is increased with a photo card."