Soon, many credit union cardholders may be able to effectively lock and unlock their credit and debit card accounts at will, making them less vulnerable and less appealing to card thieves.
The new feature will come via a technological innovation known as CardLock, a service that has been developed and offered by PSCU Financial Services. CardLock will allow cardholders to lock or unlock their cards, effectively turning them off or on, with a simple call from their cell phones.
An attempted transaction on a locked credit or debit card will be declined and will generate a call from PSCU alerting the cardholder to the attempted transaction. Recurring transactions set up with merchants, however, will be accepted even on locked cards.
“We lock our homes and cars to prevent or deter theft, and CardLock works the same way for credit and debit cards,” said Steve Ruwe, chief risk officer at PSCU Financial Services. “Cardholders tell us this service gives them a sense of control and security that they have never had, and consumers who are wary of online shopping or identity theft appreciate the added confidence when using their cards.”
More than 600 credit unions with a total of about 13 million cardholders process their debit or credit card transactions with PSCU, according to the CUSO. Fifty credit unions so far have expressed interest in the new technology, Ruwe said.
Ruwe explained that PSCU had responded to the strong desire among consumers to get involved in the fight against card fraud and have more control over their debit and credit card accounts.
“We think there is a tremendous reservoir of desire among consumers to stop being passive card fraud victims and to start having more control over whether their cards are compromised,” Ruwe said. He added that just using CardLock will not make cardholders in any way liable for fraud damages that might occur if the card is compromised.
“That had been a key question in our focus groups early on, and we wanted to make it clear that using CardLock will not carry any additional consumer responsibility, only opportunity,” he said.
PSCU will charge a fee to take part in the service, but, Ruwe said, the fee will decline as a credit union increases the percentage of its credit and debit card base that takes part in the program. Credit union members whose credit unions offer the service will have to go to a Web site provided by PSCU or their credit union to enroll their cards and phone numbers, Ruwe said.
He also explained that PSCU had been very sensitive to the other concern expressed by consumer focus groups: ease of use. “If the solution was not easy and convenient to use, they made it clear they wouldn’t use it,” Ruwe said.
To keep CardLock easy to use, PSCU tested it live in shopping and dining venues with testers standing in lines and swiping or handing cashiers cards that had been turned off. When the cashiers reported the cards had been declined, the testers dialed their preprogrammed CardLock phone numbers to turn the cards on before swiping them or asking the cashier to process them again. This time the transactions were approved. Once the number was preprogrammed into the testers’ phones, the whole process of unlocking the cards took about ten seconds, Ruwe reported.
He also explained that PSCU believed that the key consumer attraction to the technology would come more from consumers desire than to protect themselves from monetary losses. Consumers are already protected from monetary losses from card fraud, but face a great deal of frustration and inconvenience from what has sometimes become multiple card compromises.
“Every time a consumer has to have their debit or credit card replaced, its a tremendous hassle,” Ruwe said. “They have recurring transactions that they have to change and update. They don’t have the use of their cards while the new cards are issued. Consumers find this very frustrating, and they want to protect themselves from that.”
CardLock’s roll out met with a mixture of admiration and enthusiasm from different parts of the industry.
“I say congratulations to PSCU for being proactive and willing to take the on the fraud question so directly,” said Jeff Russell, CEO for TMG Financial Services, the card portfolio purchasing arm of The Members Group, a card processing CUSO that also uses the First Data processing platform. Russell noted that PSCU had been wise to tap into consumer frustration with the ongoing card thefts and that TMG was working on a similar product but that it was not yet ready to be revealed.
Chuck Cashman, director of product management for CUNA Mutual Group, was guardedly optimistic, noting that PSCU appeared to have created a service that offers something to consumers, credit unions and merchants.
“That’s what we look for in a really good fraud solution,” Cashman said, “a win-win-win. Something for everybody.”
Ruwe said that PSCU developed CardLock on its own and not in formal cooperation with either its data processing partner, First Data Corp., or Visa and MasterCard. The CUSO has applied for a patent for the innovation, and Ruwe said it could work with other processing platforms as well.
“We would have to modify it to make sure it recognized those systems, but it could be done fairly easily,” Ruwe said. He also said that the CUSO would not be opposed to sharing the innovation, possibly for a fee, with other processing firms that work with credit unions, but he stressed that the CUSO was more focused on making it available to its member credit unions in the near to medium term.
Ruwe, Russell and Cashman all agreed that the technology has the potential to become a major antifraud weapon for the entire industry. If enough cardholders decide to keep their cards locked when they are not using them, or even the very fact that they can keep them locked, there will be less incentive for someone to steal them for a fraudulent purpose, Cashman asked.
Currently, only Visa has announced any similar product, launching a program with JPMorgan Chase in the U.S. that notifies some Chase cardholders by phone or text message after their credit or debit card is used. The card brand is also testing a similar program in Britain.
—dmorrison@cutimes.com