Find Balance In Fraud Management

Efficient and cost-effective approaches can help shield credit unions from evolving fraud trends.


Card fraud is on the rise, and organized crime groups from around the world are leading the charge. For every $100 worth of card transactions in 2010, 4.46 cents were lost to fraud, according to the Nilson Report. A thriving black market makes it easier than ever for thieves to purchase skimming equipment and stolen card information online, increasing a consumer’s risk of becoming a victim.

Fraud is happening everywhere: retail stores, the gas pump, and the trusted ATM. According to Gartner, debit card fraud has increased fivefold in the past five years. A single major compromise can wipe out a credit union’s entire fraud reserve and jeopardize its image in the community.

So what can a credit union do to reduce the risk of fraud?

At most institutions, an in-house security or fraud specialist has many responsibilities and only limited time to regularly monitor debit card accounts for potential fraud. Managing these issues can be cumbersome and tedious, especially with limited resources, time, and experience.

In many cases, fraud management may be better handled through an outsourced arrangement. This approach shifts the daily tasks of fraud management, including detection, prevention, resolution, card compromise event management, as well as some of the fraud responsibility, to a third party.

An outsourced fraud management solution gives credit unions the assurance that their fraud monitoring is overseen by a team of analytical experts and fraud agents. These professionals have the skills, technology, and capability to act quickly and decisively when a problem is detected. They also have the knowledge and expertise to identify trends and potential threats, allowing them to take proactive measures to help protect a credit union’s cardholders from danger.

Jefferson County Federal Credit Union ($102M, Louisville, KY) is a perfect example. At this credit union, fraud management previously fell on the shoulders of just one employee. When cardholders were victims of fraud, the credit union took affidavits, obtained police reports, initiated chargebacks, contested issues, and manually updated member accounts. It was a cumbersome process that diverted that employee from her many other responsibilities.

Today, the credit union relies on Vantiv’s Omnishield® service to provide round-the-clock fraud protection and serve as the main contact for lost or stolen cards and fraudulent transactions.

With a partnership like this, credit unions can – in the event of a compromise – continue to focus on serving their members’ daily needs without undue interruption while the outsourced fraud management team handles many aspects of the situation. This is especially beneficial to credit unions that don’t have staff on hand to monitor card activity during non-working hours, holidays, and weekends.

“Outsourcing our fraud management has been a godsend,” says Gary Edelen, senior vice president of Jefferson County.

A third-party fraud team can also handle the chargeback process, which is often overwhelming and difficult to manage for a credit union. With a team of experts working on the credit union’s behalf, chargeoffs can be reduced and reimbursement of fraud losses increased.

Budgeting for fraud is also a challenge. Being able to treat fraud as a fixed business expense is an advantage that an outsourced fraud management solution can provide because it helps to reduce the guesswork associated with assessing fraud risk. With losses from credit and debit card fraud expected to reach $10 billion by 2015, according to the Nilson Report, credit unions have the opportunity to budget for fraud more accurately when outsourcing fraud management to experts.

“OmniShield eliminates the headache associated with chargebacks and chargeoffs. Not only does Vantiv handle the entire chargeback process for us, but we can now treat it as a fixed expense. We have a better understanding of what the cost may be, which helps us potentially reduce our risk,” Edelen says.

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