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Early Detection of a Common Point of Purchase is Key

By: Jamie Rowsell

As Americans increasingly shift toward debit cards as a preferred method of payment, it is clear that both personal and card data are reaching unprecedented heights of vulnerability. Large-scale data breaches of major retail chains are front-page news. They receive a swell of airtime in news programs across the country. Personal information and credit/debit card data for hundreds of thousands of people is compromised, sending shockwaves through customers, retailers and financial institutions.

Add to that the “smaller” incidents that deeply infest the world of debit card fraud. These include the discovery of a card-skimming device at a local gas pump or the discovery of a false point-of-sale device at the local mall; while data breaches get the headlines, the smaller fraudulent activities are having an equally damaging impact on consumer confidence.

In a 2008 Global Industry Analysts survey of consumers’ preferred method of payment, the majority of those who chose debit cards did so for their ease-of-use. But convenience comes with a price. A January 2010 report by Aite Group estimated that card fraud is costing the United States $8.6 billion annually.

In an article at about how consumers can protect their debit card information, Avivah Litan, an analyst with Gartner Inc., touched on the relationship seen between worsening economic conditions and increased card fraud. Making particular reference to widespread skimming at gas stations, she said, “Gas pumps are notorious for skimming because they’re produced by only a couple of different manufacturers, and if someone gets the key to one from a disgruntled employee, they can insert a skimming device inside the pump where it can’t be seen.”

The problem of skimming, from gas pumps to ATMs, is rampant and growing. In response, many financial institutions are turning to customer education. While this can help to address the problem, no amount of education is going to eradicate it. Institutions must find a way to proactively protect customers and, ultimately, their own reputations and bottom lines. One way is through the early detection of a common point of purchase.

A CPP is a transaction location (such as an ATM or POS terminal) that debit cards share in common. Discovery of a CPP among defrauded cards offers the potential to prevent the criminal use of other cards used at that location within a related timeframe, which could easily number in the thousands. In such a case, early detection could mean the prevention of thousands of fraud cases.

Given the number of transactions customers make every day, it can be extremely difficult to uncover a CPP through manual processes such as the use of spreadsheets. It is inefficient, taking valuable time from other fraud and money laundering investigations, and frustrating for the person that must manually scan the thousands of transactions. This is where advanced transaction monitoring software can play a vital role.

The latest technological advances in transaction monitoring and fraud detection software let investigators search through thousands of cards to uncover commonalities in seconds. This early awareness translates into the ability to act very quickly to stop further damage.

A 2011 Javelin Strategy & Research survey on identity fraud confirmed a significant increase in debit card fraud. Whereas in 2009, it comprised 27 percent of all card fraud, in 2010 that number jumped to 36 percent. 

Most people that experience a compromised card alternate between feelings of violation and anger. Even more so when they discover the fraud before their bank finds it. The discovery of a compromised CPP is one of the primary means of stopping debit card fraud quickly, before it can spread to a larger body of customers. This helps an institution prevent losses to both its bottom line as well as its reputation. Transaction monitoring using artificial intelligence offers an option to beleaguered fraud investigation units by providing the means to act on debit fraud activity quickly. Rapid discovery and isolation of a CPP is perhaps the most efficient solution currently available.

Jamie Rowsell is a researcher and writer at Verafin (

Copyright (c) May 2012 by BankNews Media