NEW YORK – Visa USA (search) Monday introduced new technology to help thwart credit card fraud before it occurs, at the checkout line, following several recent high-profile thefts of customer data.
Visa said the "Advanced Authorization" technology, being rolled out now, across all U.S. member banks, might cut fraudulent card use as much as 40 percent by alerting merchants instantly to transactions that might raise red flags.
More than 20 large- and mid-sized U.S. banks which process over half of Visa USA's $1.3 trillion of annual transactions have been testing the technology in the last year, Visa said.
"With the high-tech fraudster changes that have gone on, it was clear we needed to look more at fraud patterns," said Jean Bruesewitz, senior vice president for processing and emerging products, in an interview. "In addition to looking at a single account and the behavior of that account, we compare that account to others that have been exposed to events such as a data compromise, or a hack."
San Francisco-based Visa's 14,000 member financial institutions have issued more than 463 million cards to U.S. cardholders -- roughly 1.6 for every person in the United States.
MasterCard International (search), Visa's largest rival, has several security and risk products, spokeswoman Jessica Antle said.
One, RiskFinder, uses neural networks and technology from Fair Isaac Inc., a provider of credit scoring systems, to examine fraud patterns and the behavior of cardholders and merchants. Visa also uses neural networks, which try to simulate brain activity. RiskFinder was introduced in 1998.
Visa said that when a card is swiped, its new Advanced Authorization technology provides an instant rating of the transaction's potential for fraud to the card issuer, including whether the card was part of a reported security breach. The issuer can then tell the merchant whether to accept or decline the transaction.
The review process takes less than one-millionth of a second, it said, so customers shouldn't notice processing delays.
Visa said the technology might reduce its fraud rate to $3 per $10,000 of transactions from the current $5 per $10,000, cutting fraud losses by $164 million over five years.
Among the companies that have in 2005 reported stolen or misappropriated customer data are Bank of America Corp. (BAC), ChoicePoint Inc. (CPS), PNC Financial Services Group Inc. (PNC), Reed Elsevier's LexisNexis unit, Retail Ventures Inc.'s (RVI) DSW Shoe Warehouse and Wachovia Corp. (WB).
Analysts have said a 2003 California law requiring notification of security breaches prompted the disclosures.
Bruesewitz said Visa might implement its new technology worldwide. It has more than 1 billion cards that generate in excess of $3 trillion of annual transactions.
"This was built for U.S. issuers," she said, referring to the technology. "We are definitely talking to other regions."