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Banks to stop $8 billion in credit card theft but it will infringe on your privacy

Banks to stop $8 billion in credit card theft but it will infringe on your privacy
PHOTO COURTESY OF SHUTTERSTOCK

In 2015, banks lost $8 billion in fraudulent credit card transactions, according to Javelin Strategy & Research. That came from just 4.5% of U.S. adults being victims of card fraud. Banks are obviously anxious to bring that number down.

While cards with chips are helping, card fraud is still going to continue for a while. Plus, some of the anti-fraud measures already in place flag legitimate transactions as fraud and leave consumers frustrated at the checkout counter. However, banks think they've found another way; it just needs you to give up your privacy.

The idea is to have banks keep tabs on your smartphone's location. All they really need is your phone number, as we've shown in the past.

If you're in a store trying to pay with a card, and your phone is at that location, then the transaction goes through. In situations where your phone and card aren't in the same place, then other anti-fraud measures come into play. Visa claims this system can reduce misidentified fraud and declines by 30%.

The real trick, though, is going to be getting consumers to sign up. Visa and MasterCard both already offer this service, but most banks won't sign on because they're worried about how customers will react.

Bank of America, J.P. Morgan Chase and American Express are also exploring the idea, but are moving slow to avoid customer backlash. Some banks are already making it clear they'd only use location data for anti-fraud measures not marketing.

If banks do go forward, at first this feature will probably be a voluntary sign-up at first. However, experts are predicting that in the coming years it will be a required feature.

Of course, then banks have to deal with customers who don't take their cellphones everywhere. In some cases, banks don't even have customers' cellphone numbers because they started banking before cellphones were everywhere.

Would you let banks see your location if it meant fewer declines and greater protection from fraud? Let us know your thoughts in the comments.

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