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TMG releases white paper on empowering cardholders to prevent fraud

The Members GroupPayment processor The Members Group released on Monday the third fraud-themed white paper in a series of four aimed at helping financial institutions empower cardholders to prevent card fraud.

TMG Senior Fraud Prevention Analyst Nicole Reyes, the author of the paper, said recent data breaches at major retailers were “long overdue” consumer wake-up calls.

“Even the most high-tech and human analysis systems are improved when cardholders are actively engaged in the monitoring and detection of red flags on their accounts,” Reyes said. “Much of this is due to the fact that today’s consumer fraud tools rely on triggers set by the cardholders themselves. Although fraud detection strategies are becoming extremely granular with every new version of fraud-prevention software, a consumer remains the best at predicting his or her own purchase behavior. Consumers are, therefore, most equipped to understand which types of transactions qualify as unusual for their accounts.”

The paper stressed consumer education by financial institutions as a means to help consumers prevent fraud.

Reyes said consumer education is valuable for both the consumer and financial institution, adding that the number of communication outlets make it easy for financial institutions to share a large volume of information regarding fraud prevention.

Additionally, the paper encouraged financial institutions to provide fraud prevention tools to consumers. According to the paper, research from Javelin Strategy & Research showed that more than 50 percent of fraud victims in 2012 detected fraud using financial alerts, credit monitoring and identity protection services.

The paper pointed to fraud text alerts as instrumental in helping consumers detect and prevent fraudulent activity. The alerts are customized to an individual institution’s existing program, and if a transaction is flagged as unusual, human analysts then examine it and seek verification of the transaction from the cardholder.

Reyes said in the paper that cardholder involvement is just an added layer of protection to bolster the controls the institution already has in place.

“FIs should not feel the need to wait until after a major incident makes the news to deploy the above strategies,” the report said. “Counterfeiters often wait months to pull the trigger on their fraudulent transactions, so ongoing education about diligent monitoring of transactions is always a good idea.”

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