NYCE, Fair Isaac Focus on Terminal-Based PIN Debit Fraud Control

Seeking to contain a growing form of payment card fraud, the NYCE Payments Network LLC has called upon risk-control technology provider Fair Isaac Corp. to help it spot fraud at the network's point-of-sale terminals and ATMs that accept PIN-based debit cards. While NYCE is not reporting any unusual fraud, its move is an indication of the card industry's growing concern with fraud on PIN-debit transactions, once considered the safest form of card-based payment. Several publicly reported database breaches in the past two years have compromised PIN-debit cards along with credit and signature-debit cards, including the huge breach at TJX Cos. that has cost the retailer $130 million (Digital Transactions News, Aug. 15). Concerns about PIN-debit fraud have grown as PIN debit transaction volumes have climbed over the past several years, with annual growth rates of around 20%. Research firm TowerGroup Inc. predicts debit card issuers could lose $2 billion to fraud before 2010 if they don't improve fraud controls, a Fair Isaac release says. NYCE, a unit of Milwaukee-based processor Metavante Corp., has used Fair Isaac's CardAlert Fraud Manager since 1999 to help its card-issuing members identify suspect transactions and thwart payment card counterfeiting. The new profiling technology focuses specifically on card activity at the terminal. For NYCE, it gathers data about dollar amounts per transaction, transaction activity at various times, and other information relating to the network's 280,000 ATMs and 1.5 million POS locations where cardholders use PIN-debit cards, according to Nicole Delport, Fair Isaac client partner. In that way, Fair Isaac will build a profile of normal activity to flag abnormal activity. “The profiles are continually updated so it's going to get smarter and smarter,” Delport says. The system will generate a score from its device monitoring that will rank risk on a scale of 1 to 999. The higher the score, the higher the likelihood of fraud. It also will generate risk assessments from Fair Isaac's Falcon neural-network customer-profile system using data NYCE itself gathers through its network and pooled data Fair Isaac brings in from other users. Then a blended risk assessment will be given to each transaction, enabling debit card issuers to better decide on a course of action, according to Delport. “It's going to help us ID fraud sooner, but it's also going to ensure a higher a percent of the suspects [questionable transactions] get worked,” she says. NYCE president Steve Rathgaber tells Digital Transactions News via e-mail that the new system will help fraud-prevention managers identify potentially fraudulent transactions in real time. “This new application offers NYCE and our clients an even more robust tool by adding a new level of information that can be monitored by the network, that clients can leverage in their own decision-making process, and that will be integrated into the existing CardAlert Fraud Manager service,” he says.