Visa Europe announced last week that it is contracting with ValidSoft to provide mobile location services that help banks detect fraud. We believe these services have great value when it comes to protecting payment accounts and preventing fraud, and that many more banks and card companies will adopt them once they see the value. The way they work is by tracking user locations via their mobile phones and comparing that to other transactions the user is conducting. For example, if a user’s phone is in England, but the user is simultaneously withdrawing cash from an ATM machine in Germany, that is cause for suspicion and will raise an alert.
ValidSoft is owned by ElephantTalk, a supplier of telecommunications and content services for B2B networks. As such it has direct access to mobile networks, tables, and services around the globe and can provide mobile based location services without requiring that users opt in. Many financial institutions are interested in using these services for fraud detection but are concerned about the privacy implications and don’t want their customers thinking they are following them around. ValidSoft has been certified as ‘privacy respectful’ by EuroPrise, a European based privacy group, and has agreements with the mobile networks it works with and through to respect their privacy policies, removing the largest barrier to entry for leveraging these services – privacy concerns.
Last July, William Clark and I wrote a note on these services “Get Smart With Context-Aware Mobile Fraud Detection” and predicted among other things that by YE15, at least 15% of all payment card transactions will be validated using mobile location and profile information.
We believe Visa Europe’s move is the start of this trend, and that many more card companies and banks will follow by adopting this technology.
After all, our mobile phone is practically tied to our umbilical cords – we rarely leave home without it. Visa knows it and so do the rest of us. Why shouldn’t it serve as a useful tool for preventing fraud against us?