Visa U.S.A. is about to introduce a service aimed at reducing the credit and fraud losses from transactions authorized with outdated account information.
The service, called VisaNet Enhanced Authorization, will allow most issuing banks to receive and review far more authorization requests than they do today without expanding their systems.
The service also will update "hot card" files on Visa's computers as soon as an issuer reports that the card is severely overdrawn or fraudulent. Today, these updates are updated only periodically.
At present, Visa authorizes many transactions itself based on files that issuers update periodically. Visa passes along only about 55% of all authorizations to the issuing bank.
Issuers that subscribe to the new service will be also able to check other high-risk transactions such as mail order purchases. The new service could save the banking industry about $100 million a year, said a Visa executive.
Only the largest card issuers have authorization systems capable of reviewing every credit car transaction before it is authorized. The vast majority of issuers review only 50-70% of the transactions they authorize.
Visa plans to test the service starting next month, and to roll it out early next year.
Subscribers to the new service will pay the same fees to Visa -- 1.7 cents per authorization -- that they pay for the present authorization system.