Case Study: Customized Fraud Prevention
In today's climate of heightened alertness, credit unions are looking for the best in technologies that prevent credit and debit card fraud. But often, the most high-powered technologies come at the cost of a membership's ultimate customer experience. While preventing fraud is key, it's also important for CUs to stay as true as possible to the member-centered environment they promise upon the opening of each new account.
Sophisticated fraud detection technologies are often designed to flag all suspicious activity and do not have the ability to apply analysis to each case before taking action. While cardholders appreciate the diligence, they also expect convenience. Having their account suspended while traveling is not only inopportune; for some members, it can mean the end to their travels—and perhaps to their relationship with the card-issuing credit union.
United Nations Federal Credit Union has employed solutions providing highly sophisticated analysis that is thorough, yet customizable.
While $2.6 billion United Nations FCU is based in Long Island City, N.Y., its members live in 205 countries and territories. Among these members, international travel and related expenses are commonplace.
Because it would not be unusual for a United Nations FCU member to make an ATM withdrawal in China on a Monday and incur a hotel charge in Egypt on Tuesday, the CU recognized the need for a customizable fraud analysis program—one with adjustable parameters that would decrease the number of transactions held unnecessarily.
United Nation FCU's members have heavy travel schedules and frequently need to relocate for any number of months on mission. Because of this, the CU's card services department adopted a technique to reduce and also quickly resolve fraud-related inconveniences—such as blocked cards at hotels—by limiting the number of problematic card suspensions that occur because of unique travel patterns.
The CU works with TMG (The Members Group, a CUES Supplier member in Des Moines, Iowa) which utilizes First Data's Falcon Fraud Detection System. The system is flexible, setting parameters based on the distinct habits of United Nations FCU's membership. What makes the system invaluable to the CU is its neural network, which learns and adapts to new fraud techniques as it observes the purchase patterns of a particular credit union membership. Complementing this is the customized service offered by the CU. "When members can give us their travel itineraries ahead of time, we can alert the system," said Merrill Halpern, manager of card services for United Nations FCU.
In addition, the system is supported by a team of TMG analysts trained by Halpern's card services team on which types of transactions deem attention and which are run-of-the-mill. These analysts, teamed with the neural network, are key to catching fraud quickly. All transactions are allowed to flow through the fraud detection network, which has 90 different decision elements and the ability to support real-time decisions. This means TMG can help United Nations FCU enforce a decline at the point of sale if needed.
When Falcon was first applied to United Nations FCU's program in May 2006, the CU's card decline rate was approximately 1.2 percent on credit cards. Within two years, that rate has been lowered to between .05 and .06 percent. Based on this experience, United Nations FCU recently applied Falcon to its debit card portfolio. Results of that effort are not yet available.
For More Information:
Cards Risk Senior Manager, The Members Group
See the original story on CUES.
