The holiday shopping rush is here and while merchants are prepared for what they hope will be a busy and profitable selling season, creditors are bracing for the annual increase in credit card fraud as retailers are swamped, and their ability to stop fraud is greatly strained.
Industry figures show fraudulent credit card activity can increase 15 percent or more during the holiday season.
Overall annual losses to banks, credit grantors and retailers from the fraudulent use of credit cards is estimated to be $1.5 billion. For years, such losses were treated as an “acceptable” cost of doing business, and the increased costs due to fraud were passed along to honest credit card users in the form of higher interest rates and fees.
But, as lenders face more competition for customers, and fraud losses continue to spiral, they can no longer turn a blind eye to the problem. Instead they are using innovative software to fight back. A pioneer in helping lenders combat fraud is Advanced Software Applications (A.S.A.) of Pittsburgh.
A developer and marketer of data mining and decision support software, A.S.A. uses a hybrid of software technologies including neural networks, and traditional statistics to track and identify patterns of use, including fraud. The system is called ScorXPRESS(R), and is being hailed by risk managers as a real breakthrough in dealing with fraud in a very business-oriented manner.
“In the past recognizing and stopping credit card fraud, especially Application Fraud, was a labor intensive and difficult task,” said A.S.A. President and Founder Bill Gossman. “With ScorXPRESS we’ve been able to help our customers reduce fraud by 30 to 50 percent, reduce or eliminate review and verification costs, and increase the amount of `good’ new business they are able to book.”
The software can be easily customized to each lender’s specific needs, and has proven highly successful for clients such as GE Capital, Beneficial National Bank USA, Capital One, and Western Union.
Instant credit is one of the most popular and effective marketing tools used to entice consumers to make a purchase. Nationally, it’s estimated that as many as two-thirds of consumers who open instant credit accounts make an immediate purchase, and for some large lenders, 90 percent of credit card applications originate from instant credit offers.
It is this fertile climate that has helped to make Application Fraud, also known as ID or True Name Fraud, one of the fastest-growing areas of credit card fraud. By using the identity of consumers with good credit ratings, and taking advantage of the time pressures associated with “instant credit approval,” sophisticated criminals minimize the chance that an application will be rejected or flagged for further review.
These thieves obtain personal information about their victims from a variety of sources such as hospital records, personnel files, payroll records and the Internet. Or, they illegally purchase credit bureau reports. In either event this information is used to open new accounts instantly. In most cases the victim doesn’t know their identity has been compromised until they receive late payment notices, collection calls or are turned down for credit because their credit record has been damaged. And, while the victim is generally not liable for the purchases, they are responsible for clearing their good name which can take years of effort.
ScorXPRESS combats this activity by searching credit card applications for any pattern or mis-information that may indicate a fraudulent application. The process takes just a few seconds, and generates a score for the lender to act upon. The higher the score, the less likely the application is fraudulent. Lower scores indicate a greater chance that the application is fraudulent, and trigger a manual review and verification.
“We believe this powerful software provides lenders with a strong weapon in the increasing battle against credit card fraud,” said Gossman. “And consumers also benefit as lenders are able to keep fees and interest rates lower, and help to protect honest consumers from the hassles and trauma of ID fraud.”
Advanced Software Applications is a leader in packaging advanced technologies for enterprise-wide data mining, automated data analysis and on-demand decision support. The company’s award-winning products are highly regarded as breakthrough “best-of-breed” solutions. By combining advanced technologies, such as neural networks, with traditional statistics, A.S.A. has created affordable, off-the-shelf business products for fraud detection and prevention, risk management, and database marketing. Founded in 1992, A.S.A. is a privately held company headquartered in Pittsburgh, and distributes its products throughout North America, Europe, Australia, New Zealand and Asia.Details