Viewpoint: Fraud Quiver Requires More than One Arrow
With fraud prevention as a top priority, and the EMV transition in full swing, we in corporate and government sector prepaid payments are getting questions about fraud mitigation and when our prepaid cards will make the switch. Some prospective clients are even putting EMV as a requirement in their requests for proposals. But moving to a chip-enabled prepaid card may not be the only option in prepaid programs where counterfeit card fraud—which EMV helps prevent—is not the top fraud threat. In fact, investing in EMV could divert resources from more effective methods of fraud-fighting for a particular prepaid program. As a bank with decades of experience in risk management and fraud prevention, it’s up to us to make sure our clients understand where the risks lie and what tools work best in each situation.
Complex by Nature
Fraud is a complex problem that requires an entire ecosystem equipped with multiple tools that work in tandem to prevent fraud losses and identify suspicious activity. That ecosystem also has to be built so that legitimate users can use their cards and access information about their accounts, while fraudsters are kept at bay. And the best practices that we’ve developed over the years suggest a layering of different tools is needed as no silver bullet protects against all fraud.
As an example, for benefits disbursement programs, phishing scams can be very problematic. It requires not only tools at the bank, including well-trained agents within the call center, to detect suspicious activity but it also requires educating benefits recipients not to share sensitive information. Cardholders must be taught that the bank or government agency will not be contacting them and asking for sensitive data—no matter how convincing the email or caller is.
It’s also imperative to separate facts from fiction for clients and cardholders. Unfortunately, misstatements in the mainstream media can lead to misconceptions about what technologies like EMV can and can’t do. It’s important to remind clients that cardholders are protected by Regulation E depending on the type of program, and in Bank of America Merrill Lynch’s programs, by Zero Liability which offers additional protection.
Weighing the Costs
Every fraud-fighting tool comes with a price tag, which is why we do cost-benefit analyses and make recommendations to our clients, accordingly. If clients want to pay for adding EMV to their cards, for example, we want to make sure they’re getting the most bang for their buck. And we look at the trends to see where fraudsters are making their moves, so we can adapt.
|“Moving to a chip-enabled prepaid card may not be the only option in prepaid programs where counterfeit card fraud—which EMV helps prevent—is not the top fraud threat. In fact, investing in EMV could divert resources from more effective methods of fraud-fighting for a particular prepaid program.”|
However, applying resources to fight fraud that’s rarely experienced actually may have a negative impact on our clients and their cardholders. This investment may be better spent elsewhere: such as reducing the cost burden to clients and cardholders, or investing in other fraud-fighting techniques that deliver more value.
Through our experience in the government and corporate prepaid sector, we’ve seen a different mix of fraud compared with credit cards or even debit cards. We’ve built up a knowledge base and toolkit that puts us in the best position to make fraud-fighting recommendations—rather than having specific tools mandated in the RFP.
Some tools we utilize to great effect are:
- Using neural network scoring to identify suspicious or unusual transaction activity
- Establishing transaction limits based on expected behaviors within a certain program or portfolio
- Monitoring calls and using advanced techniques to authenticate callers that exhibit suspicious behaviors and sending suspicious calls to specially trained fraud agents
- Working closely with the networks (Visa and MasterCard) and our technology and call center partners to develop an end-to-end approach and share information about new fraud techniques and how we can prevent them.
It Takes Teamwork
It’s incumbent upon the industry to work together. Fraudsters always navigate to the weakest link in the chain. Working together is a great way to fight today’s fraud but also to develop effective fraud tools of the future. Prepaid is unique—not only in its structure but often in its use cases and usage patterns. That means our industry can’t just follow the path of credit and debit. Where the same tools work, great, but we can’t be complacent that our work already has been done for us. Diligence and training of individuals involved in the delivery of prepaid is important. We also need to be building solutions that address the uniqueness of our products while, at the same time, working in concert with the rest of the payments industry to secure the entire system end to end.
Specifically, we must always be vigilant about securing payment systems to help prevent data breaches and limit the data (or the value of data) captured in breaches. Issuers, acquirers, merchants and networks need to continue to work together to prevent criminals from using any aspect of the card payments ecosystem to perpetrate fraud or capture information illicitly, including stealing card data from any participant or probing or entering the network through merchant terminals or issuer call centers. And we need to better educate the public on how to avoid scams so they don’t inadvertently give out confidential information that could be used in account takeover or other schemes.
At the end of the day, education is paramount for cardholders and making sure clients understand what tools can best manage fraud for their specific programs. As an industry we also need to anticipate the next form fraud is going to take so we can be ready to face them together.
Alex Liu is responsible for Bank of America Merrill Lynch’s commercial and government prepaid card strategy, new product development, and ongoing product management and maintenance. He has 15 years of experience in prepaid. Prior to joining Bank of America Merrill Lynch, he was responsible for global prepaid strategy and products addressing financial inclusion at MasterCard. Alex was named one of Paybefore’s 5 Rising Stars of Prepaid. He may be reached at: email@example.com.
In Viewpoints, payments professionals share their perspectives on the industry. Paybefore presents many points of view to offer readers new insights and information. The opinions expressed in Viewpoints are not necessarily those of Paybefore.
“Bank of America Merrill Lynch” is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp., both of which are registered broker-dealers and Members of SIPC, and, in other jurisdictions, by locally registered entities. Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp. are registered as futures commission merchants with the CFTC and are members of the NFA. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured * May Lose Value * Are Not Bank Guaranteed. © 2016 Bank of America Corporation.