A new paper from The Members Group seeks to reassure credit unions about usingtext alerts as a fraud prevention tool.

When used for fraud prevention, a card issuer sends a textmessage to a card holder about a recent transaction that meets theissuers parameters as suspicious. The card holder then has a chanceto reply that they recognize the transaction or that they don't. Ifthey don't, the account is suspended and the card issuer sendsanother text message with a phone number for the card holder tocall for further investigation and instructions.

The tool has been found to have significantly limited card fraudlosses and has often proved popular, but some credit unions stillhang back, the payments CUSO reported.

“Yet even with the ease of use and potential fraud loss savings,some credit unions and community banks hesitate to take the firststeps toward communicating with customers in this way,” the CUSOwrote, adding that the hesitation is often tied to one of fourmisconceptions: first, that card holders will dismiss fraud textalerts as spam; second, that merchant names in the texts willconfuse card holders; third, card holders already receive too manymarketing messages and, fourth, the credit union may not have yetrolled out other parts of a mobile banking operation.

Each of these can and should be addressed, TMG explained. First,card holders opt in text fraud alerts so it is highly unlikely theywill see them as spam. Second, the merchant names in text messagesare the same as those used in fraud alerts sent by other means,such as over the phone or in an email. Third, customers understandand treat fraud alerts differently from marketing messages and,fourth, the use of fraud text alerts can be a good first steptoward starting a mobile banking program.

“Credit unions and banks understand they must begin to make moreservices available via digital, mobile tools, as they are becomingattractive to a great number of target consumers, including theunder served,”TMG wrote. “Yet they also understand some customersmay need to be eased into this new way of managing their finances.Starting a fraud text alert program is a simple way to conditioncustomers to begin their banking via mobile phone.”