With privacy concerns about its mobile phone location-based credit card fraud-detection technology in Europe resolved, ValidSoft Ltd. has set its sights on entering the U.S. market within the next few months, the company CEO says.
Visa Europe struck a deal with ValidSoft late last year for Visa’s processing banks to employ Valid-POS software, which combines the use of a consumer’s credit card data with the proximity of his mobile phone during a card-present transaction to help detect fraud (
Because consumers feared the technology “tracked” their every move, privacy was a major concern during the Visa Europe launch, Patrick Carroll, CEO of Offaly, Ireland-based ValidSoft, tells PaymentsSource.
Valid-POS in March 2010 earned a European Privacy Seal from EuroPrise, a certifying body in Europe, validating it as a secure data fraud system utilizing an anonymous encrypted service while also protecting consumer privacy, according to ValidSoft.
Touting that validation, which showed the software did not use a global positioning satellite format for potential ongoing monitoring and was active only when a credit card transaction was taking place, gradually helped to ease privacy concerns in Europe, Carroll says.
Valid-POS in testing the service with an undisclosed number of financial institutions in Europe, Carroll says.
“We are interested in where the cardholder isn’t, not where he is,” Carroll says. “But privacy is a big issue in the UK and we had to demonstrate over time that our product is strong on security and privacy.”
The U.S. market could be receptive to the service because it currently lacks widespread deployment of EMV chip card technology, which is used in most markets abroad and is considered to be more secure, Carroll contends.
ValidSoft deploys telecommunications support for its technology, which it terms Proximity Correlation Logic, from its parent company, Netherlands-based Elephant Talk Communications Inc., an international provider of business software and services to the telecommunications and financial industries.
After a customer registers for free use of Valid-POS at a Visa Europe issuing bank, the bank deploys the software to monitor card transactions regardless of the geographic location customer, Carroll says.
In correlating the cardholder’s mobile phone location with the initiation of an ATM or point-of-sale transaction, Valid-POS determines if the cardholder is nearby where the transaction is taking place, Carroll explains.
If the cardholder’s cell phone is in New York but the card is presented in Mexico, it’s likely a fraudulent transaction, Carroll notes.
In such a case, the Valid-POS software would alert the card issuer, who in turn, would alert the consumer through an automated phone call that the card was being used in a location where the mobile phone was not present, Carroll explains.
“We feel we have something unique here that can be deployed quickly and it will deal with fraud, respect privacy issues and make things tough for the bad guys,” Carroll says.
ValidSoft and Elephant Talk announced their own mobile wallet venture three months ago, highlighting another arena in which Carroll believes mobile phone-based fraud security technology will thrive.
“In the future, when your phone is your wallet, everyone will have their phone with them all of the time, so it works very well in that setting,” Carroll says. “If a person loses his phone, it will be no different than what they would do now in alerting the phone company, but there would a simultaneous alerting of their bank.”
Valid-POS’ fraud-detection process does not require merchants to take any action nor does it matter what type of mobile phone the customer is using to engage it. The software monitors transactions as they occur through the processing bank, which has the most to lose in a fraudulent transaction, Carroll says. Participating banks pay ValidSoft a fee when they opt to use the service.
Industry experts have mixed views on the technology.
Avivah Litan, a vice president and distinguished analyst at Gartner Inc., a Stamford, Conn.-based market research company, predicts that by 2015 at least 15% of all payment and card transactions will be validated using mobile location and card profile information.
“I always felt there would be more interest [worldwide] in this technology, but nothing has changed much (since the Visa Europe arrangement),” Litan tells PaymentsSource. “But I knew they were waiting on Visa Europe to work through the privacy issues and get ValidSoft certified.”
Litan believes ValidSoft has a good chance of generating interest in its products in the U.S. because it offers a data security technology not in use in the North American market.
Brian Riley, senior research director and analyst with Needham, Mass.-based TowerGroup, feels many card-authorization channels already exist in the U.S. market and it will be difficult for the concept to find a niche.
“If there is a change in payment form to mobile, it [ValidSoft] would have to prove itself in that scenario, as there may be other measures in place that would catch that stuff [fraud attempts] anyway,” Riley tells PaymentsSource.
“ValidSoft can’t be dismissed, but is it a solution looking for a problem, or is it the ultimate solution?” Riley asks.
ValidSoft hopes to launch the service in the U.S. late this year or early next year.
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