Visa’s Senior Risk Exec Talks Purchase Alert Program

Visa has set an Oct. 14 date for having all issuers provide consumers with Purchase Alerts on all on and offline Visa transactions processed through VisaNet (GPR and commercial cards are excepted).

PYMNTS asked Mark Nelsen, SVP of Risk Products and Business Intelligence at Visa, to give us a little insight and a few answers to the questions that we’ve been getting about this service. Here is what he said:

PYMNTS: Fraud reduction. By the time that the consumer gets an alert on a purchase that isn’t hers, the fraudulent transaction has already happened. Is the fraud benefit the fact that most of the bad guys get away with multiple bad transactions since consumers don’t check their statements frequently enough to notice?

MN: Correct.  A transaction alert will not prevent the initial fraudulent transaction, but most fraud runs involve multiple transactions, so alerts can reduce overall fraud losses by up to 40%.  Our data has shown that cards enrolled in Visa Transaction Alerts have fewer fraudulent transactions than cards without transaction alerts.

PYMNTS: And, with respect to EMV in-store, is this designed to blunt the friendly fraud that is happening with cardholders who know that they can game the system? In other words, is there a cardholder liability shift here? So, if consumers are altered of a fraudulent transaction and they don’t speak up, are they still able to claim a chargeback?

MN: The upcoming Transaction Alert requirement does not shift any liability to merchants or consumers, nor does it offer any additional chargeback protection to issuers.

PYMNTS: On that note, is there a cardholder liability shift here? So, if consumers are alerted of a fraudulent transaction and they don’t speak up, are they still able to claim a chargeback?

MN: The upcoming Transaction Alert requirement does not shift any liability to merchants or consumers, nor does it offer any additional chargeback protection to issuers.

PYMNTS: Is this online and offline transactions?

MN: The Alert requirement applies to any transaction (online or offline) that is processed through VisaNet.

PYMNTS: I see that cardholders will be opted into text messaging unless banks opt out. Is there any sort of a ROI calculation that shows the cost/benefit of SMS alerts?   

MN: We don’t have an analysis comparing the cost of SMS texts with fraud reduction. But the Purchase Alerts service, as designed, will help achieve our objective of empowering cardholders to take an active role in managing and protecting their Visa account, whether that’s through SMS text, email, or a combination of both. SMS text and email alerts are both effective channels for delivering real-time information to cardholders. For some, SMS texts might feel more immediate and accessible than emails, while others, who prefer to manage and review their transaction history from a PC, might find email alerts more convenient. To make transaction alerts accessible and useful for everyone, we encourage issuers to enable as many communication channels as possible. Because cellphone carriers charge a fee on SMS texts, we do give issuers enrolled in the Purchase Alerts service who don’t want to incur that cost the option to opt out of SMS text alerts.

PYMNTS: What do third parties have to do to satisfy your requirement – other than to provide transaction alerts and not simply fraud alerts?

MN: To comply, issuers must provide consumer credit, debit and reloadable prepaid Visa cardholders with an option to enroll in transaction alerts. For the purpose of this requirement, we define a transaction alert as an alert generated when the card has been used (card present or card not present) to make a purchase and not based on a fraud score or other fraud controls.

PYMNTS: Why would an issuer want to opt out of Visa’s service?

MN: We encourage issuers to launch their own alerts service, which gives them greater control over the cardholder experience. Issuers with their own service can better customize the alert messaging, manage the number of alerts a cardholder receives, and implement other services as part of a broader purchase alerts program.

The Visa Purchase Alerts site is intended as a turn-key, low-cost solution for issuers that don’t have the resources to support their own program. Our primary objective — whether it’s through the Visa service or an issuer program — is to give Visa cardholders the option to enroll in transaction alerts, a proven tool for identifying and halting fraud runs.

More details on the program can be found here: Visa’s Purchase Alert Program.