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Ask Hoot-E: Benefits of Card Controls for Debit Cards

By Hoot-E posted 04-15-2024 10:05

  

Special thanks to @Trevor Witchey, AAP, NCP, Senior Director, Payments Education for helping me write this blog!

In just the past ten years, the number of Suspicious Activity Reports (SARs) filed for credit and debit cards has more than tripled while most financial institutions are seeing increased Regulation E write-offs from debit card fraud claims.  In response to increased fraud, financial institutions are looking for solutions to reduce or mitigate fraud events among cardholders. This can be a challenge, as most account holders have a debit card and card terminals and ATMs can be hacked or infected with malware, online databases are being infiltrated and physical cards or smartphones with card data stored are being stolen.

What can financial institutions do to reduce fraud? There are several things financial institutions can try. Financial institutions could improve their communications through various outlets (such as their website, mailings, emails, text alerts and social media pages), utilize fraud scores, have improved dispute procedures in case cardholders are trying to defraud the institution and monitor ATMs for any skimmer issues.  Another solution is to introduce the card controls product to the account holder as a means to manage how they utilize their debit card.

Typically, card controls are an extension that a financial institution can add to its existing online app and provide to account holders. This would be optional for cardholders and allow them to change settings/create restrictions for how and where their debit card may be used.  Here are a few examples of settings (but know these could differ by vendor):

  • Enable Card for Use – Essentially “locks” the debit card. This can easily be turned off or on by the cardholder.
  • Locations
    • Enable or disable international payments.
    • Restrict which states or geographical areas where debit card activity is permitted. It’s important to be careful with this one, as several places have their card processors located in another state (like Disney’s processor is located in California while Disney World is physically in Florida).
  • Transaction Types – Set parameters regarding which transaction types are allowed and which are not for a certain card. For example, allowing a card to be used at ATMs or in-store, but disallowing online transactions.
  • Merchant Types – An account holder can decide exactly which merchants are allowed and which are not. For example, only wanting a card to be used at grocery stores or gas stations while disallowing it to be used elsewhere like restaurants, personal care, travel and other merchant categories.
  • Threshold Amount – Setting a dollar limit on the maximum transaction allowed to occur on a debit card.  For example, a card may have a $3,000 limit on point-of-sale (POS) purchases, but the holder is only comfortable with $500. 
  • Alerts – Several card control products allow alerts to be generated for the above settings such as the type of transactions, merchants used or dollar amounts.

Looking for Fraud-Fighting Resources?

Check out our Did You Know videos, available on YouTube, LinkedIn and our website! We have videos covering types of ATM fraud, point-of-sale fraud, writing an effective suspicious activity report and so much more!

The card control vendor will send communications to the card processor regarding any settings changes.  Then, when a debit card transaction occurs that is contrary to the settings the revised settings at the card processor should block the transaction or at least alert the cardholder. 

The biggest hurdle in implementing card controls is convincing your account holders to use the service.  Secondly, the card controls feature seems to be mostly attached to apps rather than the website version of your online banking platform.  Thus, there could be a gap in use for individuals who don’t use a smartphone or are not tech savvy. That said, this great feature could create good educational moments for your cardholders to learn more about your online app.  Also, if you utilize card controls as a provided service, this shouldn’t supersede any disclosures about reporting debit cards as lost or stolen.  This is just a complimentary service to empower account holders to manage their own risk.

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