News & Views - Savantor

Simple technology to slash credit card fraud

Monday, 01 August 2005

So, why is UK credit card fraud 25 times worse, relatively, than an Eastern European country?  The answer, like all good ideas, is very simple.

You have to go back to Hungary in the late 1990's when credit card crime was a real problem, around ten times the regional average. Faced with this, OTP Bank, the country's largest retail bank (over 50% market share, and well over 1M credit cards) went to one of their key technology suppliers and asked them for a solution which wouldn't break the bank. Miklos Braun and his team developed a fiendishly simple and effective solution.

The solution, MoneyGUARD, simply notifies cardholders every time their card is used. If it is fraudulent use, the cardholder simply replies to the text and the bank's service centre immediately calls them on their mobile phone and starts to deal with the problem including shutting the card down.

Fraud across the whole card estate dropped by 75% in the first quarter and had dropped by more than 90% by the end of six months. Within a year OTP's fraud was less than one tenth of the UK average. Now it is now around 1/25th of the UK rate and that with a product penetration of around 25%. Amazing, particularly when you consider that the charge for a three year licence and standard installation doesn't even reach six figures.

On top of the notification there are a whole range of added value features for consumers such as access to balance information, foreign exchange rates, etc.

Consumers love it! So much so they all pay for it. On average, on a purchasing power parity basis, the Hungarian consumer pays around £4 per month. 

Now, not only have OTP added literally millions to the bottom line in fraud saving, they have also generated a highly profitable new income stream for themselves, whilst pleasing customers. Is that or is that not a banker's dream?

Now, five years later, this mature and fully proven technology has just become available outside Hungary, so watch this space …

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