Visa Says Anti-Fraud Technology May Save $20 Million in 1993
NEW YORK (AP) _ Visa International said Thursday it expected a new anti-fraud technology that detects counterfeit credit cards to prevent $20 million in losses this year.
Fraud is a major problem for the credit card industry. In 1992, worldwide losses due to a variety of scams totaled $1.18 billion for all Visa and MasterCard branded credit cards, company figures show. Through counterfeit cards alone, Visa card issuers lost $125 million last year.
The industry has responded with a wide range of programs to prevent illegal use of credit cards. Citibank last year began digitally imprinting cardholders’ photographs on its standard cards.
Fraud with plastic cards gained national attention after the arrest this week of suspects in Connecticut and New York charged with stealing $100,000 through use of counterfeit automatic teller machine cards.
Visa’s new technology, known as card verification value, or CVV, was rolled out in April. The San Francisco-based credit card association said the technology, which checks a card’s magnetic stripe for alterations, prevented $3.4 million in counterfeit losses in April and May alone.
Visa spokesman Albert Coscia said the card association expects to prevent $20 million in counterfeit losses in 1993 through use of the technology. The magnetic stripes of Visa cards are encrypted with a numeric value, which is transmitted at the time of purchase to the cardholder’s bank for verification.
If the strip has been altered, the transaction is cancelled and the credit card account is shut down, Coscia said.
About 230 million of the 304 million Visa cards in circulation contain the encryption, but only 10,000 merchants have credit card terminals than can detect the CVV coding.
Nevertheless, industry officials have welcomed this technology because it prevents the first fraudulent use of an account, preventing charges being made the account’s credit limit.
″Until someone determines that they have a counterfeit card, they can rack up a lot of charges,″ said Lisabeth Weiner, spokeswoman for First Chicago Corp., one of the nation’s largest credit card issuers.
First Chicago, which has $7.2 billion in outstanding card loans, uses the new card verification technology on its Visa cards, Weiner said.
″We think it has got great potential,″ she said.