Aiming to reduce credit card fraud, Visa USA has launched a security tool that allows merchants to instantly check transactions in stores or online, so they can identify fraud before a transaction is completed. In an announcement Monday, the credit card company said its new "advanced authorization" system is expected to help prevent an estimated US$164 million in fraud-related losses over the next five years.
Jean Bruesewitz, a senior vice president of processing and emerging products for the company, said advanced authorization adds 10 bytes of additional information to the data sent to card-issuing banks and card-processing companies after a credit card is used. That new information provides a vertical view of the previous and existing spending patterns on the card account and a horizontal look at transactions occurring in real-time across the credit card network.
"It looks for unusual patterns of activity [or] anomalies" involving merchants or credit card numbers, she said. Advanced authorization uses algorithms and other mathematical analyses to look for and identify patterns of fraud on the network.
The extra analysis takes about 600 nanoseconds of the two seconds needed for a Visa transaction to be checked by the system, Bruesewitz said. The new information yields a risk score for the credit card transaction that is added to a risk condition code. That code looks at system events, such as a large data theft involving credit card numbers.
Advanced authorization essentially provides an instantaneous rating of a transaction's potential for fraud, including whether the card is part of a batch of stolen credit card numbers or other data.
The Visa system already instantly sends messages to merchants advising them on whether to accept or decline the transaction, but the new system adds more information, Bruesewitz said.
The new tool has been in testing since last June, and some credit card issuers and card transaction processors are already able to use the extra 10 bytes of advanced authorization data in their systems, Bruesewitz said.
Visa USA hopes to have the tool fully deployed by banks and card processors within a year, she said.
Advanced authorization can protect transactions of any type, including in-store purchases, telephone sales, Internet purchases and manually typed-in sales.
Today, credit card fraud accounts for five cents of every US$100 in transactions. Visa believes that advanced authorization could reduce that to three cents per US$100 in transactions, Bruesewitz said.