Visa wants to track your smartphone to prevent credit card fraud

In two weeks I’m flying to Barcelona to attend Mobile World Congress, and as I have in every previous year I’ve gone to this conference, I’m going to engage in an annual ritual. Before I leave, I’m going to call up my banks and tell them my itinerary. Otherwise I risk my cards getting declined when I make my first purchase off the plane.

It’s a pain but I’m happy to go through the hassle because it adds an extra layer of protection against fraud. And nothing looks more suspicious than a card being used in Spain eight hours after it was used to buy a latte in Chicago. [company]Visa[/company] on Thursday announced a new service that might mean I’ll no longer need to make that annual call.

Visa is offering location tracking to its banking partners, which will verify your location on your smartphone whenever your card is swiped. If the locations don’t match up, it doesn’t mean the transaction will be automatically declined – sometimes your phone’s battery goes dead or you leave it in the hotel room — but Visa uses it as an additional input for its fraud detection algorithm. And if it does get a location match, then there’s far smaller chance the bank will decline a legitimate transaction even if otherwise looks suspicious. Visa estimates it can reduce such mistakenly declined transactions by 30 percent with the new tech.

So how does Visa get in your phone? It’s working with card-issuing banks to embed a location-tracking module into their regular banking apps. Whenever the card is swiped, Visa partner Finsphere, a geospatial analytics company, pings the app for a coordinates and then reports its findings to Visa in real time (Visa says the process takes less than a millisecond). The feature will be available to banks in April, so hopefully we’ll see it soon.

Finsphere and Location Labs launched an independent service called PinPoint in 2010 that performed many of the same calculations, alerting users to possible fraudulent transactions. The difference here is Finsphere’s work with Visa directly affects whether a transaction is approved or declined.

You have to opt into the service, so your banks won’t track you — at least not wirelessly — without permission. This raises the question of whether you want yet another company or app following your movements, but in this case it makes sense to me. My bank already tracks my activities – it knows where I use my card and what crap I buy – so location tracking isn’t as big a deal for me as long as it will keep my card activated and help stop identity theft.

My only concern is if Visa tracks more than it needs to. I asked Visa and Finsphere for some details on their data policies, and their answers alleviated many of my worries. Finsphere CEO Mike Buhrmann told me in an email that Finsphere and Visa only collect the location data necessary to make fraud determinations (usually just the Zipcode you’re in), and they discard the data after it’s served its purpose. Visa added that location tracking is only active when you’re outside of your home area — it only kicks in when it detects a purchase in a different city — and that it doesn’t use any of the info it gathers for marketing purposes.

“No running tab is kept, but we do know your last region of location so transactions can more effortlessly be approved or actual fraud detected in case you lost your credit card,” Buhrmann said.

This post was updated at 11:45 AM with Visa and Finsphere’s answers to my data privacy questions.



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