Your Bank is Watching

Banks are Tracking You via GPS for Your Protection

Your bank is making an effort to reduce credit card fraud by tracking you. Customer cell phone locations are being monitored by banks in an innovative (or is the word intrusive) effort to “protect” the consumer.

Tracking the location of the customer, via GPS through the mobile device, allows the bank to monitor where a purchase is taking place. Naturally, purchases outside of a credit card owner’s location is indicative of potential fraud. If your phone is in New York, and you swipe your card in New Jersey, the transaction might be blocked.

The Wall Street Journal reports that U.S. Bancorp is one of the first trend-setters to prevent fraud using this method, tracking the credit card holder through his or her mobile device. Pilot tests have proven the method effective in reducing fraud. The military bank USAA and Discover Financial Services have shown interest in similar services. For now, most companies will take an observer approach and monitor the effectiveness of this initiative and watch for backlash from privacy advocates, before going all in on this Big Sister plan.

While the premise of the tracking service is to prevent fraud and protect the consumer, banks are the real beneficiaries of this system. The bank, not the consumer, is typically liable for any fraudulent charges. Preventing these charges when the customer’s location does not match the credit card’s location is all about saving the bank money.

Another benefit to the bank is reduced declines. Tracking will block some transactions, but will allow others when the GPS location matches the card’s location. The allowed transactions are expected to exceed the blocked transactions by several fold. Visa says it will reduce blocked transactions by about 30%, which means more money for the bank in transaction fees and lower customer service costs.

Declines are a security measure to protect against fraudulent charges. Declines on legitimate charges, however, are a burden to the card holder. By recognizing that the customer and card are in the same location, the rate of declines on legitimate purchases decreases, improving the customer experience and avoiding unnecessary security measures to conduct a transaction. The consumer demands protection against fraud, but not at the expense of having a transaction declined. The hope is that this initiative will enhance the consumer experience in both areas.

The ultimate concern from a customer perspective is providing more of your personal information to corporations. While the customer may not have a choice moving forward, as experts suggest more banks will be incorporating tracking features in the near future, privacy is always a concern to a card holder.

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