The service is being developed in collaboration with Carlsbad, Calif.-based BasePoint Analytics and is the company's first offering designed to help card issuers detect debit card fraud at ATMs and point-of-sale systems during the authorization process.
"From our perspective, a PIN transaction is probably the most secure transaction" a cardholder can make, said Jerry Sargent, MasterCard's vice president of debit strategy and alliance development. The new service will add to that security while at the same time alleviating growing consumer concerns about online fraud, he said.
"This is really about listening to our customers," Sargent said. "We have seen all sorts of headlines about e-mail scams, ID theft and data breaches, and the concern was that as this goes out into the wider consumer world, it may have an impact on consumers using these cards."
MasterCard's new service addresses a definite need, said Avivah Litan, an analyst at Gartner Inc. Even so, it is unclear how successful the company will be in getting banks and other issuers to sign up for the service, she said. A majority of banks currently use Fair Isaac Corp.'s Falcon fraud-detection system and their own homegrown systems for dealing with payment card fraud, she said.
"But MasterCard, along with Visa, is in a better position to see networkwide transactions," which can be an advantage in detecting fraud, Litan said. The fact that MasterCard is working with BasePoint is also noteworthy because of the latter's expertise in fraud detection, she added.
MasterCard's Online Fraud Monitor service will use a proprietary risk-scoring model that will look at factors such as account spending, transaction histories and device-level activity to calculate the likelihood of fraud on an individual ATM transaction, Sargent said. For instance, if a card that in the past has been used only domestically were to be used in a large transaction in a foreign country, the transaction would automatically be flagged as high-risk for follow-up action.
MasterCard has been offering a similar fraud-detection capability for credit card and signature-based ATM transactions for some time now. With the new service, the company is extending the same capability to PIN-based transactions.
A lot of effort has gone into ensuring that the new service will not lengthen debit card transaction times or result in too many false positives, Sargent said. A "significant amount" of historical transaction data and data on fraudulent transactions has gone into the development of the risk model, he said.
"We want to minimize to the extent possible false positives while hitting the sweet spot in finding fraudulent transactions," he said. "The model that we have built looks for anomalous behavior with a great level of accuracy."
MasterCard already offers a similar fraud-detection capability for credit card and signature-based ATM transactions via its Expert Monitoring System and MasterCard Alerts services. With the new service, MasterCard is extending the same capability to PIN-based transactions.
Visa U.S.A. Inc. is working on a similar fraud-detection capability. In May, the company announced that it would be integrating its Visa Plus ATM network with its primary credit card authorization system in a bid to provide real-time fraud intelligence around every Plus ATM transaction. The integration, touted as part of a broader strategy to bolster security around the Visa payment system, is expected to be phased in through the rest of this year and 2007.