Biometrics ‘New’ Weapon to Beat Fraud?
Banks, merchants told to consider capabilities of mobile, digital technology
ATLANTA -- Fingerprints and facial recognition might become the new tools for banks and retailers to fight credit-card fraud, according to two risk-management firms.
The technology, called biometrics, can be a viable tool to link customers to their mobile wallets, according to a recommendation from LexisNexis Risk Solutions. In a report the risk-management firm released last month, Atlanta-based LexisNexis said 78% of issuers surveyed are planning to make significant investments in fraud mitigation in the coming year, with many considering knowledge-based authentication that’s both “dynamic and static.”
Knowledge-based authentication often uses “secret” questions to verify the identity of a card applicant or user.
In its recommendations, the report said card issuers should supplement “applicant-provided data with additional dynamic-data sources, for example fingerprinting and a person’s reputation … in addressing both application fraud and [fraudulent takeover of an] account.”
The pressure to act on data security is especially intense as merchants move to adopt Europay MasterCard Visa (EMV), a chip-card-based security measure that comes in at the point-of-sale terminal. “While the EMV rollout will undoubtedly hinder counterfeiters, these latest reports show that there are still many avenues fraudsters—and consumers—are exploiting,” said Monica Eaton-Cardone, co-founder and COO of Chargebacks911, a risk-management firm based in Clearwater, Fla. “As we highlighted in a previous EMV chargeback analysis, many small and mid-sized brick-and-mortar retailers are just now discovering how costly chargebacks can be.”
Today, issuers can more readily incorporate dynamic-data sources and biometrics into their fraud-mitigation arsenal by leveraging the microphones, cameras and fingerprint scanners that are built into many computers and mobile devices, Eaton-Cardone said. Issuers can readily implement voice, facial and fingerprint recognition to verify cardholders’ identities.
At the same time, Eaton-Cardone said merchants need to do their part to prevent fraud. “Static techniques have become less effective as fraudsters’ methods continue to evolve, so merchants have to be prepared to field many different forms of fraud from multiple sources,” she said. “Retailers with physical stores must update their terminals to accept EMV or they will become an easy target for fraudsters looking to exploit weak points in the system. And with evidence showing that chargebacks are on the rise, all merchants need to be proactive in working to prevent them."
Eaton-Cardone said merchants should employ a multilayer solution, including tools and strategies to verify customers’ identity and location, combat hacker and “botnet” attacks, protect against affiliate fraud and mitigate chargebacks. Since chargebacks can come from three different sources—merchant error, criminal fraud and “friendly fraud” (or consumer fraud)—Eaton-Cardone said it is vital to understand the reason for each chargeback and take steps to address it.