Over the last few months I have worked in a couple of environments in which making some simple changes have significantly reduced fraud, and even more importantly loss, within their customer point-of-sale accounts. Now this is largely on the Debit card side. One change is free and of course the other....costs money. These options are not incredibly new or even too high tech....but what they are, is effective. This is more of just a thought to possibly spur on a discussion, a cost-benifit analysis, or possibly even a risk assessment (hehe, I had to throw it in there). I have seen these changes reduce fraud by at least 50% (usually more) but together I have seen multiple times that fraud was reduced by 75% or more.
The first one, and free one, is simple to implement but get ready for some angry customers. It is to simply to reduce the default limits on all signature based transactions. I know this might not be popular with call centers or your customers,but by adding a smaller single transaction limit and an overall daily limit you can significantly reduce both your exposure and your customers. For example: A single signature based transaction limit could be set at $200 with a total daily limit set at $500 - $600. This way if the card is compromised you can minimize the overall loss.
I know the signature based limit seems a bit drastic (to some) but you can then raise or keep your PIN based transaction limits to something a little more accommodating. This also has some benefits with the transaction dispute process as well. With this more restrictive limit basis you can always raise it for your "VIP" customers. I would document this through a risk-based process or assessment (ok, thats two...I know). With these more restrictive limits hopefully your fraud software or department, or even your customer, will catch any items before too much damage (or none!) is done. This is a good lead into another option.
The next method, and one that is growing to become my favorite, is secured SMS or text messages to the customer. This occurs by every transaction the customer (or card/account) makes and the blocked transaction is immediately in "real time" sent to the account holder(s) phone. We all know the majority of us are attached to our cell phone or portable devices so by adding this service (heres the cost) you can use your customers to help expand your fraud department immensely. At every transaction the services will send the basic information of the transaction (amount, time, place, etc) in a text format. This way if you receive an alert and it was not you or your kin...you can call your bank and let them know. Most even have the number or a "text to" report the transaction as fraud within the actual message. From my limited exposure this service (for what it provides) is affordable, especially when you weigh the decrease in fraud and dispute loss it has brought to the environments using this strategy. The hard part is getting your customer base to adopt it. I have even seen customers who decide not to use the service being charged a fee. It has proven that useful in significantly reducing fraud...again, I have seen just this function reduce fraud by over 70% in more than one environment. Here at the Garland Group we are big fans of collaboration and team work...so seeing your customers help you monitor their fraud, seems like a no brainer to me!
I hope this shares some insight or at least stirs some conversation within the retail payments and fraud functions in your environment.
P.S. - Do not forget to conduct your risk assessment on the messaging alerts!
