MasterCard offers SMS to detect credit card fraud

If you've ever had a credit card purchase mysteriously rejected only to discover later that the bank thought you were a fraudulent user, you may appreciate an effort by MasterCard International to use SMS (short message service) to streamline the process of clearing up card-usage questions.

MasterCard has joined with mBlox, a service provider of mobile messaging infrastructure, to add an SMS option to its Aristion fraud detection system and is making Aristion Communicator available to banks beginning Wednesday.

"It is an add-on module that will work as a turnkey or plug-and-play solution to easily give banks the ability to reach more customers rapidly and reliably at a lower cost," said Johan Gerber, associate vice president of MasterCard's risk products division. "Instead of every bank trying to do this on their own, this SMS option is ready to use and can be installed in about an hour."

MasterCard, in Purchase, New York, and mBlox, with primary locations in both London and San Francisco, are first rolling out Aristion Communicator in Europe due to the high use of mobile phones across the continent and in the U.K. One bank in the U.K. and another in Italy have expressed an interest in using the service, Gerber said, declining to name any customers.

The credit card company expects to make Aristion Communicator available in Asia and throughout the Americas by the end of the year, Gerber said.

SMS fraud alert systems are already being used in parts of Eastern Europe and in South Africa by individual banks, but MasterCard believes it is the first credit card company to offer an SMS fraud detection and alerting system on a worldwide basis. MasterCard has spent the last 12 months developing and testing the SMS service, Gerber said, but the company declined to provide any users outside of MasterCard to recount their experiences.

Banks must be MasterCard Aristion customers to add on the SMS option. Currently, 47 banks throughout Europe, Asia and the Americas use Aristion, Gerber said.

Banks that opt for Aristion Communicator will be charged an installation fee of between €2,500 to €10,000 ($3,200 to $12,800) depending on size and the options selected, and will then be charged a fee of €0.085 per SMS for MasterCard's top-end product, Gerber said.

"Banks can quickly make that money back in terms of savings," Gerber said. "Banks currently use call centers to alert users to potential fraud, which is expensive because it requires about 20 to 30 calls to detect one fraud. The false positive ratios for these calls are high and it could take anywhere from 30 minutes to an hour to make the required calls."

MasterCard is advising that banks offer the SMS service to its customers on an opt-in basis. Customers who want to take part in the service, and who have and use a mobile phone, must then go through a registration process. Once registered, customers will be contacted by SMS should a high-risk transaction be detected, and can then either approve the transaction or block it.

"We also offer more than one media -- along with SMS, pages and e-mails can also be sent not only to individual customers but to the fraud detection centers and the bank as well," Gerber said.

MasterCard will work with banks to roll out the SMS service. "Though the system itself is easy to install, it could take a while for the service to hit the streets because it depends on things like mobile phone penetration and the collection of usable mobile phone numbers," Gerber said. "Unless a bank already has a good set of data in its databases, it could take a couple of months."

Gerber also conceded that fraud detection, with or without SMS, does have its limits. Should someone steal your mobile phone along with the credit cards in your wallet, they could simply instruct the bank to approve a purchase if they received an SMS alert over your phone. "Obviously, this is the sort of thing we have considered, but the likelihood of that scenario happening isn't high enough to dump the entire system," Gerber said.