RANCHO CUCAMONGA, Calif.—When a member has a legitimate card transaction declined due to fraud detection rules incorrectly flagging it, the CU’s plastic often heads right to the bottom of the wallet.
“If you have a decline (“false positive”), 40% of people will put that card away, and it may never come back to top of wallet,” said Michelle Thornton, director of product development at CO-OP Financial Services.
For that reason and others, CO-OP said it is dedicating significant resources to help credit unions fight fraud, all in an effort to not only to reduce fraud losses, but also keep members from facing too many declines on legitimate transactions.
“Fraud is our number-one concern, as it is for many organizations that support credit unions,” said Thornton. “Fraud has gone through the roof.”
Fraud Growing Quickly
Experts have stated that the rapid growth in card not present fraud since the EMV migration began in the U.S. has startled many. Thornton added that the growth in account takeover fraud has been equally surprising.
“Fraud is the main focus for CO-OP in 2017 and beyond. It’s our largest investment, not only in operational expense, but also capital expense,” explained Thornton. “It’s the biggest pool of money we are spending—on tools and people to combat fraud. That includes machine learning—artificial intelligence—that will help catch EMV fallbacks and will allow more legitimate transactions to go through securely, without a false positive. False positives are killing issuers and cardholders.”
CO-OP expects to improve this year on its ability to help credit unions reduce the number of false positives. CO-OP today, through its card member support services and fraud mitigation tools, is outperforming industry averages.
“The industry average for monitoring card usage in real time, were fraud is denied on the spot at the point of the transaction, is three false positives for every true act of fraud caught,” said Bill Prichard, senior manager of public relations and corporate communications. “We have already cut the rate of real time false positives down to 1.3 false positives for every one incident of fraud. So about half the industry average. This gives credit unions more approved transactions and more interchange, and keeps members’ cards top of wallet.”
Michelle Thornton, CO-OP FS
Thornton emphasized that participating in the Zelle Network is a big opportunity for credit unions today, and more importantly, tomorrow.
Last year CO-OP partnered with Early Warning to offer credit unions access to the Zelle Network, a financial institution-led digital payments network in the U.S. that lets members of participating FIs send money to anyone with a U.S. bank or credit union account.
“This is a great partnership because through it our credit unions and their members will be able to send and receive money in real time,” noted Thornton. “It’s a partnership with some of the biggest banks in the country.”
One Easy Method
Thornton said that giving CU members access to one, uniform, easy-to-use method for P2P is key to acceptance and growth of person-to-person payments within the movement. She said those traits will make it easier, too, when consumers want to switch relationships from a big bank, like Wells Fargo, to the credit union.
“With the big banks on the Zelle Network, now it will be one less concern for consumers when they transfer their business,” said Thornton, adding that potential new members won’t have to worry about what the new P2P service will be at the credit union and how it will work. “The user experience will be the same, whether you bank at Wells Fargo or the credit union.”
But what is most important about credit unions being able to access the Zelle Network is they will remain relevant with the membership as P2P usage takes off, said Thornton.
“The use cases for P2P today are still a bit limited—pay for a friend’s lunch, for example. So the volume is fairly small right now. But what this collaboration with Zelle does is prepare us for some of the bigger use cases for P2P that will roll in, such as bill pay. There are a lot of tentacles with this and this partnership will help credit unions grow.”