An investment in a system that uses neural networking to detect potential fraud is paying off very quickly for Westpac Bank in New Zealand.

New Zealand's Westpac subsidiary is the latest customer in the Asia-Pacific region for the MasterCard-originated fraud risk assessment tool, RiskFinder.

The system, which involves banks around the world submitting transaction records electronically to MasterCard's world headquarters in St Louis, Missouri for rating, has been in use at Westpac for only a few weeks but has already "paid for itself" in detecting fraud, claims Vince Clark, Westpac's product manager for card issuing.

RiskFinder uses a cardholder's transaction history to measure typical behaviour and flag with a risk rating any unusual transactions. These might be unusually large amounts or out of the parts of the country the cardholder normally frequents; but the bank will not know what exceptional features have been identified in each case, says Westpac fraud manager Patrick Cattermole. This opacity is of the nature of the neural net, which has "learned" the characteristics of high-risk transactions by being primed with a lot of confirmed genuine and fraudulent transactions. "We just get a rating," he says. "We don't know how it was arrived at."

Other systems, he notes, use defined rules to evaluate risk.

The lack of known criteria does not present a danger of legitimate customers being wrongly identified as fraudsters, Cattermole says. If a transaction is flagged as a high fraud risk, the bank simply contacts the legitimate cardholder and verifies that s/he was responsible for the transaction.

Westpac had been looking around in recent months for a risk-evaluation tool for its MasterCard customer base, says Cattermole, and MasterCard suggested RiskFinder.

Previously the bank had no automated risk evaluation product for its MasterCard accounts, but has been using Visa's CRIS system for its Visa customers. The fraud-detection software market has many players, including large firms like CA and i2.

RiskFinder is a MasterCard development from a product called Falcon, developed by California-based HNC Software. Other Asia-Pacific region users are PT ANZ Panin, in Indonesia and Malaysia's EON Bank and Alliance Bank.