Fraud protection: Which top card issuers make the grade?

By April Dykman

In 2010, identity theft was responsible for $37 billion in fraudulent charges. This week Javelin Strategy & Research, a quantitative and qualitative research firm, released its Seventh Annual Card Issuer's Safety Scorecard, which measures how major credit card issuers stack up when it comes to protecting consumers from identity theft and helping them protect themselves against fraud.

New accounts are most common fraud

According to the findings in the report, the most common new account fraud is opening credit cards, yet just one in eight credit card companies examined offer alerts for new account setup. Because of this, the scorecard explores ways that credit card issuers should make more detection alerts available for customers, allowing them to opt in or out to suit their preferences.

"We have found that prevention features offer the highest return on investment, leading issuers to see that it is imperative to prioritize educating consumers on the current technologies needed for protection," said Javelin's Philip Blank, Managing Director, Security, Risk and Fraud. "We all know that the threat landscape is not going to change; however, the way that issuers and consumers respond to those threats will."

How banks measure up

This year Bank of America received "Best in Class" for the fifth consecutive year. Runners up, in order of ranking in the report, are as follows: Discover, U.S. Bank, USAA, and Capital One. The evaluation also yielded the following key findings:

  • 1 in 4 card issuers offer two-way actionable alerts
  • Close to 3 in 4 issuers offer alerts to mobile devices
  • Overall prevention scores declined from the previous year, yet issuers still score high in resolving fraudulent charges

The bad news is that consumers are more likely to become victims. The good news is that their savings accounts most likely won't take a hit--issuers met almost 90 percent of the criteria scored for resolving fraud after it has occurred.

How Javelin rates banks

The Javelin Card Issuer's Identity Safety Scorecard rates the top 20 U.S. card issuers' protocols for protecting consumers from identity theft. Javelin also chose several additional credit card issuers to analyze for the 2011 survey. For each annual report, Javelin uses information collected from household, consumer and issuer surveys, and rates issuers using Javelin's Protection, Detection and Resolution model, which measures consumer-facing protective measures.

"Security and fraud detection are the consumer's top concern when selecting and staying with a credit card issuer," said James Van Dyke, President and Founder of Javelin Strategy & Research. "Banks need to work hand in hand with their customers to stay ahead of identity threats and implement the right security measures to best protect sensitive cardholder data."

Because of this, Javelin included more demanding criteria for the 2011 report, increasing the focus on use of a truncated Social Security Number and adding eight new criteria to the prevention category. Although prevention capability is the most difficult to accomplish, Javelin give it the most weight in its model because it's most critical for consumer protection.

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