By Ray Birch
HAUPPAUGUE, N.Y.—When a members’ legitimate debit card transaction is wrongly identified as fraud and declined, that puts the credit union at risk for losing not only that transaction but many more from the cardholder, asserts one credit union says it has found an answer to the problem.
The $1.6-billion Island FCU reports it has employed a solution from Fiserv that has markedly reduced the number of “false positives,” according to Craig Booth, CIO with Island Federal Credit Union.
“We know that when cardholders are in line, and the checkout clerk tells them their card is declined, it’s embarrassing,” said Booth. “They don’t want to hold everyone up while they call their credit union to explain the transaction is legitimate. So they just pull out that next card.”
Fiserv’s solution, Authorization Lift, relies on artificial intelligence, as well as its own experts’ instincts, to drive down the rate of false declines.
Booth said the real loss to credit unions from a false decline is the backup debit card becomes the primary card.
“As I said, they pull out the next card in line and it often then becomes the card they are most comfortable using because they trust it more,” said Booth. “You lose top-of-wallet status.”
Frustration for Members
Fiserv’s Patrick Davie, VP of card services, said the industry average for false positives today is anywhere from five to one to 10 to one, meaning 11 transactions are declined to find one true instance of fraud.
“This ends up being frustrating for members,” said Davie. “Even though you tell your members the declines are in their best interest, they are still not happy. And you get complaints.”
Booth said calls to its call center with complaints about false positives declined dramatically once the new fraud detection solution was in place.
“Island FCU’s false declines have dropped to less than 1% of their total debit transactions,” said Davie. “And that has been big during the pandemic, as consumers are using their cards more and they really want less friction now.”
With Authorization Lift, Island FCU has seen year-over-year debit card approval rates improve by 2.55%, and an average of $2,500 per day more in approved debit transactions. The credit union was recently recognized with 2020 IDC FinTech Rankings Real Results Awards for the improved results.
Systems Update Themselves
Davie said a greater reliance on artificial intelligence to assess legitimacy of transactions is one of the reasons for false declines dropping. He said that with AI and machine learning, the credit union can feed more cardholder performance data into the system more frequently and make updates to cardholder card usage patterns.
“The systems can then update themselves and be much more precise and follow the pattern of a cardholder's behavior as it changes over time. T
Craig Booth
hat means the scores that come as a result of these models is much more precise than we can come up with on the human side of fraud detection,” said Davie.
But the experts on staff at the credit union and at Fiserv play a role in the decline in false positives, Davie added.
“It’s a combination of these models being continually updated and refined, and then subject matter experts from my team working with credit unions to craft countermeasures and strategies,” Davie said.
Besides the decline in false positives keeping members happier and steering them away from using other cards, Booth said the drop in complaint calls to its call center regarding false declines has been a help during the pandemic.
“We are getting much fewer of these kinds of calls now, and that’s helping because everyone’s call center activity has been rising since consumers are using branches less,” Booth said.
A Greater Focal Point
Davie acknowledged false declines have been a growing concern for financial institutions in recent years, and especially now during the health crisis.
“You cannot really quantify their impact on your business, but they really have become a problem,” said Davie. “Now, with the pandemic creating a much larger number of card-not-present transactions, they have become an even greater focal point for issuers.”
A false decline is embarrassing for members, Booth emphasized.
“Members want less friction with their transactions, especially now,” said Booth. “I can't tell you how many members this change has impacted, but I know it is taking the friction out of many transactions and avoiding member embarrassment at checkout lines.”