MasterCard Unveils Network-Level, Real-Time PIN-Fraud Scoring

With PIN debit fraud losses rising along with consumer usage of PIN debit cards, MasterCard Worldwide announced on Wednesday a system it says will score PIN transactions in real time to assess their risk of fraud. Purchase, N.Y.-based MasterCard says when the service goes live in the first quarter of 2007, it will be the first such system to be installed at the network level and to operate globally for both ATM and point-of-sale transactions. Visa USA last year introduced a real-time risk-scoring program, called Advanced Authorization, that applies to PIN debit transactions on the association's Interlink point-of-sale network. It has begun systems integration work to apply the program to Plus ATM transactions, as well, and expects to complete this work in phases throughout this year and 2007. “PIN debit transactions continue to be popular among consumers who want a fast, convenient, and safe way to access cash and pay for goods and services all over the world,” said Patricia Preston, a MasterCard senior vice president, in a statement. “Our new solution allows banks and merchants to proactively mitigate fraud on these transactions without consumers having to change how they use their cards.” Online Fraud Monitor, which MasterCard developed with fraud-software firm BasePoint Analytics, Carlsbad, Calif., will score transaction messages while authorizations are being processed. To calculate the likelihood of fraud, it will rely on such data as activity at the ATM or POS terminal and the history of transactions on the account. Real-time processing means the issuing bank will be able to use the resulting score to tell the merchant whether it should accept or decline a transaction, MasterCard says. PIN debit transactions, in which cardholders secure payments with a four-digit code rather than with a signature, have been growing at rates exceeding 20% annually for several years, but at the same time fraud losses on the product have also climbed. PIN-debit fraud losses are currently running under 4 basis points (0.04%) of payment volume but have been rising rapidly over the last five years, according to Mike Urban, fraud-technology operations director for Fair Isaac Corp.'s CardAlert product (“The New Risk in PIN Debit,” Digital Transactions, June 2006). Well-known schemes involving skimming, shoulder-surfing, and phishing account for much of this fraud, but criminals lately have been turning to new methods. In several Canadian cities this year, local fraudsters have collaborated with store clerks to swap out PIN pads with devices rigged to capture PINs and account numbers. In one especially enterprising case, the PIN and account data were transmitted via WiFi connections from the rigged devices to a remote receiver (Digital Transactions News, June 21).