Computer checks to curb credit card frauds

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The Independent Online
FROM January next year customers at Barclays Bank who try to buy something out of the ordinary may be picked out by an 'intelligent' computer system for an on-the-spot fraud check.

The Fraud 2000 computer system, developed by the bank, is in the frontline of its battle against plastic card fraud.

The software is designed to get to know each of the bank's account holders and the way they spend their money. It attempts to weigh up the odds of a transaction being fraudulent in much the same way a person would.

This year Barclays will spend about pounds 20m on computer systems to tackle fraud. Every 30 minutes, the bank estimates that 23 of its plastic cards are stolen, resulting in 137 fraudulent transactions that cost the bank about pounds 7,000.

In 1991 the bank lost pounds 60m because of plastic card fraud. Under its Fraudwatch project during the past 18 months the bank has used the new computer software to keep an eye on credit card purchases as transaction slips come in from shops. Barclays claims the four-strong team working on Fraudwatch has picked up about 10 cases of fraud a day, often before a cardholder knows the card is missing.

From January, the bank will not have to wait for transaction slips to come in, but will operate the system on-line in shops, checking every purchase.

Customers should notice no difference, according to Barry Fergus, head of fraud prevention at Barclays, unless their purchase seems abnormal and they are asked to speak to the bank's fraud referral unit on the telephone to make sure that they are the legitimate cardholder.

'The system might ask itself, 'Does he usually travel abroad? What is his usual cash flow?',' Mr Fergus said. This way it builds up a profile of customers' purchasing patterns in its memory. 'This is probably the most complex computer development we have undertaken yet,' Mr Fergus said. He knows of only one other bank in the world that is trying a similar system.

The success of Fraud 2000 depends on a continuing rise in the number of shops using electronic equipment to verify sales involving plastic cards.

Today, 16 per cent of transactions in Britain go through electronic checks. In the United States the figure is about 80 per cent. The bank said it has 'enhanced' the magnetic stripes on the back of its cards to make them harder to defraud and was considering the use of watermarks and magnetic holograms that would make each magnetic stripe individual.

According to Barclays, losses from plastic card fraud appear to be flattening out, after steady rises since 1988. The bank is evaluating several new technologies to see how best to keep the figures falling. It has been looking into fingerprint recognition, signature verification and systems that recognise hand geometry.

British banks are expected to decide which of these systems to adopt within 12 months. Barclays wants to try them out on its 80 million customers and has asked security consultants to try to crack the systems.

'These big criminal organisations have a lot of money to invest. If they can get around them they will, so we have to test everything,' Mr Fergus said.