Mobile Payments can decrease credit card transaction declines abroad

Attempting to use a credit card when traveling abroad usually results in a declined transaction, especially when forgetting to inform the bank of your travel plans.  The banks are trying to protect the user against credit card fraud, but the majority of the time the transaction is declined fraud is not being committed.

ValidSoft (Tullamore, Ireland), a telecommunications security company, believes the solution comes in the form of mobile payments.  According to Pat Carroll, CEO of ValifSoft, when using a “present” credit card abroad and not a “card not present” form of payment, the chances the transaction will be declined increase dramatically.

“There is a high instance of credit cards being declined when you travel abroad because the banks don’t believe it’s you.  When they don’t believe it’s you they get it wrong nine times out of 10,” says Carroll.

According to Carroll, the cost to banks financial services in 2009-2010 totaled an estimated $105 billion.  Of that cost, about $30 billion was fraud while the remaining $75 billion was administration costs from all the false positives.

“It’s easy to stop fraud, you just decline more transactions. The more you decline the more the false positives increase.  Every one of those false positives means that you need to call your bank,” say Carroll. “It’s highly disruptive…and the bank loses the interchange base on the transaction they do.”

With ValidSoft‘s mobile payment security, the transaction being confirmed as non-fraudulent is correct nearly 100% of the time, according to Carroll.

“We provide a proximity correlation based on you to your cell phone, and the origination point of the transaction. That single factor changes that 90% failure into virtually 100% success,” says Carroll.

When someone arrives in a country and turns on their mobile phone, the phone tells the home network where they are.  The person may then go to the ATM and take out money.  The transaction will go to the bank, where the bank associates the credit card number with the phone number and sends it to ValidSoft.  Once it is sent to ValidSoft, the company performs a series of look-ups to make sure, for example, that the SIM hasn’t been swapped or it is not a call diverge, according to Carroll. After the look-up, which takes less than 400 milliseconds, ValidSoft then tells the bank that the transaction and phone are both in that location, and the transaction is confirmed. 

ValidSoft provides a four factor security model for mobile payments.  The first, is something you know (pin number), the second is something you have (cell phone), third, something you are (voice biometric) and last somewhere you are (proximity correlation). According to ValidSoft, you don’t have to apply all of these factors together in a single transaction but if you need to you can.

ValifSoft has two security seals from the European Union, one for data protection and the other for data privacy.

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