I could understand why an online transaction for a grand to a merchant that we’d never purchased from before would set off an alarm bell. The very polite lady at the call centre apologise for the inconvenience. I told her that I didn’t mind in the least and was happy that they were looking out for me. I suggested that they update their neural network fraud detection software, since if my wife’s card were stolen by an Eastern European criminal gang, the system would note an immediate drop in spending (boom! boom! — the old ones are the best aren’t they) but not a titter. Their call centre staff are clearly not well-versed in the more traditional aspects of English humour.
But there were two rather odd things about this call. First of all, the bank told me that in future if I expect to make a purchase in excess of £500, I should call them in advance to help them to manage the account. What a hassle. Maybe I could help them further by going to a bank branch and drawing out the cash then driving to the shops and buying everything in person, but whatever.
So I call the bank to alert them that I’m off to Moscow and the bank says: “calling us makes no odds I’m afraid. The fraud alert may still occur. It’s built into the system.”[From The Financial Services Club’s Blog: From Russia with Love]
Secondly, two of the transactions that I was asked to verify were card-present, chip and PIN transactions at UK chain retailers (Tesco and Waitrose). Why on earth would the neural network supercomputer suspect that chip and PIN transactions — with the correct card in the terminal and the correct PIN entered — might be fraudulent?
Card fraud is a problem, but let’s stay calm and look at the figures. In advanced nations with “chip and PIN” cards it seems to be manageable (it fell to half a billion pounds in the UK this year) but in countries with antiquated payment infrastructure this is not the case. Take the US, for example. Having online terminals does limit many kinds of risk in physical transactions, but virtual transactions are very vulnerable.
In addition, certain merchant segments revealed a higher prevalence of fraudulent transactions such as large eCommerce retailers, of which 40 percent saw an upsurge.[From Javelin Strategy and Research » U.S. Retailers Face $191 Billion in Fraud Losses Each Year]
So why is it that in Europe things are apparently heading in the other direction. At point-of-sale, chip and PIN is beginning to have a real impact. But away from physical transactions, e-commerce
The non-payment risk in European e-commerce has fallen to the lowest level in seven years. The chargeback ratio – the share of credit card payments charged back after an objection by the cardholder – is down to just 0.26%, from 0.34% in the year before.[From Finextra: Non-payment risk in European e-commerce reaches record low]
European e-commerce as a whole could be doing a lot better. The European Commission have just released some “mystery shopper” results showing that about two-thirds of cross-border transactions within the eurozone (which ought to be a seamless commerce zone) fail.
These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]