The new mobile fraud alert product ClairMail is introducing today is one of a wave of new products that use the unique attributes of a mobile device to improve fraud detection on mobile and other banking channels. (For instance, ValidSoft also has technology that uses mobile location services to help banks detect fraud.) Gartner has projected that by year-end 2013, location information or profile information from mobile phones will be used to validate 90% of mobile transactions. The firm also expects that by year-end 2015, at least 15% of all payment card transactions will be validated using mobile location and profile information.
In ClairMail's version of mobile fraud alerts, not only can a bank send alerts when a customer's transaction seems suspect due to unusual behavior or geography (e.g. a card purchase in Hong Kong from a customer who lives in Pennsylvania Dutch Country), but the customer can respond with a text message that feeds directly into the affected system, such that the bank can know instantly whether the transaction is fraudulent and respond accordingly by confirming or denying it. ClairMail has made a video demonstrating use cases for this technology:
"Whether this will be a killer app or not, this is a great next step for mobile banking," says Carl Tsukahara, CMO, who spoke with us in an interview yesterday. Fraud costs the banking industry billions of dollars a year and fraud incidents are still growing in the teens, Tsukahara says.
"Data suggest that consumers identify one-third to half of fraudulent transactions today through slow means," such as noticing that something's not right in their monthly checking statements, Tsukahara says. But more immediate alerts are warranted, because about half of fraud losses occur five days after an intrusion, he says.
In ClairMail's Fraud Solution, which works across credit card, debit card, and online banking transactions, customers can self-manage some alerts. For instance if they know they will never use a particular card for online purchases, they could opt to receive an alert every time one takes place. Or they could choose to be alerted every time a purchase is made in another country, or every time a $500+ purchase is made on a credit card. Then the customer can respond to the alert of an online purchase, for instance, by texting back, "not me." That message will trigger a workflow at the bank to deny or cancel the transaction.
Tsukahara says that even if the customer is getting multiple alerts, the ClairMail service can string together customer interactions and turn them into fraud responses through integrations with banks customer channels. But he wouldn't say how it does this, calling this the "secret sauce."