Careless customers invite credit card fraud

Careless customers invite credit card fraud

Summary: Customers that poorly protect credit card information are the greatest concern for banks attempting to tackle transaction fraud, according to HSBC's Australian-based chief information officer.

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Customers that poorly protect credit card information are the greatest concern for banks attempting to tackle transaction fraud, according to HSBC's Australian-based chief information officer.

"Transaction fraud or fraud in general is a major security risk [for banks], where you have consumers freely giving out their information. If consumers are not secure about their own information -- or are not being secure with their pin or not shredding their credit card statements -- that's where we have concerns," Chuck Stegan, HSBC's chief information officer told ZDNet Australia.

To combat credit card fraud in Europe, HSBC's European customers were issued with smartcards in 2005, said Stegan.

However HSBC will not launch the smartcard in Australia until merchants and major Australian banks support the card more widely. ANZ has already issued customers with smartcards, while Westpac recently implemented the backend systems to support its yet-to-be-announced smartcard.

"Fortunately for HSBC, our systems are at a state where we could launch chip cards fairly easily.

"Typically the chip card does have an effect on reducing transaction fraud but currently in the Australian market there is not a high percentage that have adopted that technology. Really it will require more merchants to adopt it," said Stegan.

HSBC is also tackling credit card fraud by replacing its fraud detection system. Following a successful rollout in the US, which has helps analyse credit card transactions, Stegan said the system is likely to be deployed in Australia by 2009.

Stegan said HSBC's current fraud detection system, Falcon -- developed by US-based analytics software specialists, Fair Isaac -- requires too much processing capability to analyse every single transaction, leaving it with just a random sample.

"Fraud detection systems tend to be very computer processing power intense," Stegan said of the Falcon system.

The new fraud-detection system, developed by SAS, looks at a consumer's historical transaction patterns and applies a probability of fraud associated with the type, location and time of a transaction.

"The fraud system will look at typical spending habits and will identify a transaction that may be uncharacteristic of what they would normally do ... or if it's coming from a high risk area in the world -- it has certain neural net capabilities," he said.

The SAS fraud detection system has resulted in HSBC's US operations processing 87 percent more data, which includes card transactions and customer information. Mainframe processing overheads have been cut by 12 percent, in turn cutting processing costs per item by half, said Stegan.

Topics: Security, Banking, Emerging Tech

Liam Tung

About Liam Tung

Liam Tung is an Australian business technology journalist living a few too many Swedish miles north of Stockholm for his liking. He gained a bachelors degree in economics and arts (cultural studies) at Sydney's Macquarie University, but hacked (without Norse or malicious code for that matter) his way into a career as an enterprise tech, security and telecommunications journalist with ZDNet Australia. These days Liam is a full time freelance technology journalist who writes for several publications.

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