Ericsson has unveiled a new service that it thinks will help stop credit card fraud.
Banks are increasingly blocking credit card transactions in certain high-risk countries due to increasingly levels of fraud. A business traveler who lives in the UK but goes to Russia can likely have a transaction rejected if the person hasn't informed the credit card company of their travel plans.
However, Ericsson believes its IPX Country Lookup service could be the answer. It uses a mobile phone to provide a confirmation that the person is actually in the country where the transaction is carried out, said Peter Garside, UK and Ireland regional manager for Ericsson's IPX products.
For the service to work, Ericsson's technology must be installed on a mobile operator's network. Once installed, Ericsson will pay the operator a 'small fee' every time a bank wants to verify a certain transaction by one of their customer's mobile phones, Garside said. Ericsson will then put a margin on the lookup fee and charge that to banks, he said. The lookup fee has yet to be set.
Garside said that Ericsson has figured out how to extract the location information from operators worldwide. The technology only identifies what country a person is in and not where they exactly are in that country. It only works for GSM networks.
To allay privacy concerns, Ericsson is recommending that the banks should get consumers' consent prior to using the transaction verification service. Once a person's approximate location has been passed onto the banks, that data will not be held any longer, Garside said.
The service will work even if someone's phone is off, but as long as they've turned the phone on at least once when they're in a new country.
Mobile phones will register with the local operator when turned on in a different country, so Ericsson will be able to query the last known location.
The service comes out of Ericsson's IPX product line, which enables third parties to bill for ring tones or other content via mobile networks.
Garside said operators won't incur any costs to integrate the service into their networks and can make money from the location information they hold. "The operators are sitting on some valuable assets," Garside said.
Banks will be able to set their own policies around the lookup service. For example, a bank may decide it only wants to pay a lookup fee for card transactions that occur in Romania and a few other countries.
Bank customers would likely agree to opt-in to the service, especially it reduces the frequency with which overseas card transactions are denied, said Peter Welch, an independent banking analyst who was briefed by Ericsson.
"I would think there is enormous potential for it," Welch added.
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