Westpac battles credit fraud

Advances in technology often wears the blame for increasing the amount of cyber crime and fraudulent behaviour, but in some cases technology can help counter fraud.

As part of its armoury against credit card fraud, Westpac has initiated a data mining system to identify and track culprits. With the analytical capability to identify certain behaviours, the bank can pinpoint and predict consumer and merchant fraudulent activities. The nationwide bank expects to generate substantial benefits per annum as a result.

Ashley Hudson, Portfolio Risk/Reward manager at Wesptac, said the objective is to "reduce credit card transaction problems and minimise impacting the customer experience."

"The greatest challenge with fraud is its constantly changing nature," said Hudson. "Fraud is an ongiong problem with Westpac."

The problem is compounded by the volume of the transactions Westpac facilitates and its reliance on merchants to be diligent on checking customer details, such as checking signatures, said Hudson.

Westpac integrated data mining software from SAS with its existing data analysis models to enable the bank to build quantitative variables. These variables are then used to identify suspicious behaviour, such as changes in customer behaviour, to help the bank identify fraud.

Sudden change in buying behaviour, such as more frequent purchases, or in a different location, are common hallmarks of fraud, and can be detected by Westpac using this system.

The bank hopes to identify cases of international fraud, which, Hudson said, can provide the biggest savings.

Skimming, the practice of making a copy of a credit card by swiping and recording the details from the magnetic strip, is another activity on the increase that the bank hopes to target.

Hudson gave the example of a waiter at a restaurant using a skimming device in his pocket to take a copy of a credit card while taking it to the cash register. The card may not be used for weeks afterwards, which makes it difficult for Westpac to determine where the point of compromise was.

Hudson said the bank has just started to identify skimming activity in Australia, but it happens in high volumes overseas already.

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