Using GPS to Fight Credit Fraud


NEW YORK (MainStreet) — More than 11 million Americans were victims of credit card fraud last year, making it the number one form of identity theft. But now, one company has come up with an innovative way to deal with the problem.

Visa Europe, an affiliate of Visa credit cards, announced this month that it will soon begin to use the location data from the GPS system that is built into most smartphones to determine if a particular credit card transaction is fraudulent or not.

Under this new plan, customers could give their cell phone information to Visa Europe, which would then be able to compare a person’s location at any given moment to the location of charges on his or her credit card. So, for example, if Visa Europe noticed a substantial charge at a car dealer in one city while your smartphone’s GPS indicated that you were actually in a different city at the time, the company would have reason to assume that someone other than you had made the charge.

The perks of such a system are obvious: The credit company would be able to detect fraudulent charges more quickly, resulting in lower costs for the consumers and card issuers involved and a faster turnaround for canceling the card and getting a new one. As Visa Europe notes in a press release, this system would also allow the company to approve legitimate charges more quickly as well.

Of course, this system does raise some questions.

First and foremost, what happens if someone steals your credit card and your cell phone? Such a purse-snatching would suggest that you had been mugged, and you would probably already be on the phone with your bank to report the credit card as stolen. Indeed, it seems that the main use of the system would be to notify people who are simply not aware that their credit card information has been stolen.

There are more basic concerns here though. What happens if you go on a trip but leave your phone at home, or lend it out to a friend or family member? Would you have to notify your credit card company to tell them to disregard the GPS information?

And perhaps more importantly, it’s unclear how this system would handle fraudulent purchases that are made online. Unless Visa Europe can somehow track the IP address or delivery information, it seems doubtful they would be able to detect fraud in this case by location alone.

Add to that privacy concerns surrounding a credit card company being able to track every single place you go and you have a recipe for blowback from privacy advocates.

Yet, for all the potential issues with this system though, it still seems like a step in the right direction for fraud prevention. If it proves popular and efficient abroad, it’s certainly possible that such a system could catch on in the United States as well in the not too distant future.

Check out more of our coverage on how to deal with debit and credit fraud.

—For a comprehensive credit report, visit the Credit Center.

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