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Location-based services for security

Location-based services (LBS) could offer South African banks opportunities to significantly reduce fraudulent credit card transactions, saving them millions of rands a year and helping them to increase customer loyalty.

Quentin Joubert, head of products: Location Based Services at Cellfind.

That’s according to Quentin Joubert, head of products: Location Based Services at Cellfind, who says that South African banks should follow the lead of mobile network operators by using LBS to increase the stickiness of their services and the efficiency of their customer-facing processes. One of the most exciting potential applications for LBS in the banking industry is as another layer of risk management and fraud detection in credit card transactions. This addresses an area which is a massive headache for banks and their customers alike.

Just in the first nine months of 2013, the banking industry’s losses due to fraud related to South African-issued credit cards amounted to nearly R367 million, according to the South African Banking Risk Information Centre (SABRIC). “Most of us have been victims of some form of credit card fraud at some point in our lives, or know someone who has,” says Joubert. “Fraud as a result of lost or stolen card costs the economy millions of rands a year. It’s a source of major friction between banks and victims of fraud, who must contact banks to get unauthorised transactions removed.”

Mature LBS technology exists in the marketplace that could help curb credit card fraud and this technology could be used, with the cardholder’s permission to verify his or her location at the time a transaction goes through on a credit card. If the LBS shows that the customer is in Durban while a shop in Cape Town is processing a payment from his or her card, the bank’s fraud department can be alerted to a possible instance of fraud.

Rather than waiting for the client to realise and report the fraud, this solution is a proactive alert which immediately raises a red flag at the bank when a transaction is processed. The service does not prevent credit card fraud, it does however reduce the impact that fraud has on the economy which could translate into savings of millions of rands per annum.

Fraud experts at the bank, altered by a fraud analytics software tool, can immediately get hold of the customer to verify the transaction. If the cardholder denies making the payment, action can be taken swiftly to protect the bank, the merchant and the customer from the fraudulent transaction. The back-end LBS for such services is already stable and in place, and could be easily integrated with any bank’s infrastructure.

Banks and telecom operators should be working together to bring this technology to market as rapidly as possible because it has an excellent business case. Such an application of the technology is just a taste of LBS’s potential in banking, adds Joubert. Banks could also be building LBS in their mobile banking apps to help customers find branches and ATMs more easily, or to drive them to partners in their loyalty programmes.

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