Andrew Rochford, Business Solutions Consultant for the Middle East and Africa at ACI Worldwide, talks about how banks in the Middle East can use fraud-fighting technology to give their cardholders greater piece of mind.

Historically, levels of payment fraud within the Middle East have remained relatively stable, while other regions around the world have seen dramatic increases. However, recent discussions at the 10th Annual Cards Middle East conference suggested that credit card fraud in the Middle East is beginning to cause concern amongst banks in the region. Levels of skimming and counterfeiting of credit cards in particular have increased considerably.

As in all regions, banks in the Middle East are currently under pressure to cut costs and ensure maximum return on investment. However, during this period of stress, banks need to make sure that fraud prevention doesn’t take a back seat. Indeed, recent consumer research from ACI Worldwide has highlighted the need for a renewed focus on fraud detection and prevention in order to satisfy and retain customers. The research found that around 36 per cent of respondents in Dubai would change their financial institution after being a victim of card fraud. In addition, 38 per cent would definitely choose to use cash over card following a card fraud incident. In fact, Dubai consumers affected by fraud were found to be among the most unforgiving of their banks in the international survey. If banks want to retain their customers, it seems that fighting card fraud has to be the key focus.

However, the fight against fraud is not without its challenges. For example, the financial services industry tends to use different definitions of fraud which can lead to inconsistencies in reporting. This makes it difficult for experts within banks to assess modus operandi and apply appropriate countermeasures. In addition, the siloed structure of fraud departments, where different teams and systems deal with different channels, makes it difficult to gain a comprehensive overview of customers’ payment patterns and to identify fraud that crosses payment types.

Traditional techniques and metrics deployed by banks to fight fraud often only highlight a problem after the fraud has occurred. By the time the fraud has been detected, the money has been taken and the customer experience has been affected. This has become particularly prevalent as purchasing becomes more rapid through online shopping. According to ACI’s research, 80 per cent of consumers in Dubai worry more about card fraud when shopping online as opposed to the face to face environment. It is therefore crucial for financial institutions to consider real-time detection methods which can prevent losses on compromised cards. These tools allow institutions to monitor and immediately recognise suspicious transaction patterns, allowing them to act as soon as the fraudster makes an attempt and thereby prevent any losses.

There are a variety of best practice anti-fraud techniques banks can employ to improve customer service and reduce losses. One example is real time, automated tools that aim to identify fraud while it is happening and prevent transactions from being authorised in the first place. Real time scoring, profiling and rules can work with the authorisation system to decline out-of-profile transactions. This ensures the bank and its customers do not suffer financial loss, and helps protect the organisation’s reputation and brand in an unsettled market.

Identification of the Point of Compromise (PoC), the location at which the card skimming has taken place, allows the financial institution to recognise trends and apply action to detect and prevent future fraud attempts. As card skimming becomes increasingly widespread in the Middle Eastern region, banks need to improve their processes to identify cards that may have been compromised early enough, so that they have time to take preventative action on vulnerable cards, before any money has been lost. Depending on the location of the PoC, the bank may choose to ‘block’ or ‘watch’ cards at risk, choose to do nothing, or a combination of the two.

Banks should also consider sophisticated ways of measuring the performance of a fraud prevention strategy, such as Point of Detection (PoD). PoD measures how many missed fraudulent transactions occur prior to the system generating its first alert on an account. The sooner banks can detect fraud on an account, the sooner they can take action on it and stem their losses. Based on an average loss per fraudulent transaction, it is easy to see the potential savings if detection is targeted at earlier transactions in the fraud cycle. Even a small drop in the average PoD of half a transaction per account can make more of a difference than increasing detection rates by a large percentage.

No matter what measures banks take, there will always be some fraud that slips through the net. However, where the bank identifies the fraud quickly, informs the customer, and provides an efficient recovery service, customers actually report very good experiences. It tends to be very positive for the banks and really can promote loyalty. If, on the other hand, it is not handled well, then it is probably one of the greatest motivators for attrition. This is particularly important given the recent findings from ACI’s global consumer survey, which revealed that almost a third of respondents in Dubai felt the speed at which their financial institution replaced their card was the main factor that influenced how happy they were with the treatment from their financial institution.

CUSTOMER SATISFACTION

Using tools such as SMS alerting can also help to improve customer satisfaction. An SMS is sent to an individual’s mobile phone whenever a transaction occurs that breaks their pre-set parameters. This gives the customer the opportunity to immediately reply and block their card if it is fraudulent. In this way, banks can put the control back into the hands of the customer and deliver a more personalised banking service. The customer experience will be improved through reducing the number of false positives, while also minimising the risk of genuine fraud being masked. This technique could be particularly effective in countries such as Bahrain, Qatar and the United Arab Emirates (UAE), where mobile penetration levels in mid-2008 were 163 per cent, 150 per cent and 187 per cent (including multiple-SIM usage).

Finally, adopting an enterprise-wide fraud prevention framework allows banks to collectively view every product or service the customer uses. With this approach, fraud losses can be managed more effectively by enabling complex fraud to be identified more quickly, before substantial losses are sustained. An enterprise-wide anti-fraud strategy also helps fraud analysts manage and resolve cross-channel alerts and cases faster and more efficiently.

Across the globe, card fraud is not only leading to losses but is also having repercussions at the level of brand, reputation and loyalty, at a time when banks are under particular public scrutiny. In particular, consumers in the Middle East region seem unforgiving of their banks after a card fraud incident. It is therefore crucial that banks in the region address the issue now before it becomes too widespread and take positive action to reduce losses, improve their image and provide a better customer service.

Working together to increase awareness of the threats and understand the impact that fraudulent attacks can have on the industry and wider economy will put Middle Eastern banks in a strong position to prevent the high levels of card fraud experienced elsewhere around the world.

ACI Card Fraud Survey Dubai statistics:

- 35 per cent of respondents were very unhappy with the treatment from their financial institution when they were a victim of card fraud;
- 36 per cent would change financial institutions or credit card company after being a victim of card fraud;
- 38 per cent would definitely choose to use cash over card following a card fraud incident;
- 73 per cent are at least somewhat more worried about being a victim of card fraud in these difficult economic times.

The ACI Worldwide research on card fraud was conducted during July 2009 surveyinga total of 2,408 respondents across eight countries including 250 from Dubai.

Andrew Rochford is a Business Solutions Consultant for the Middle East and
Africa at ACI Worldwide