I’m really pleased that MasterCard has developed a fraud detection service for online merchants that could realise a potential for 15-30% fraud loss savings. Whilst it’s a step in the right direction for the ever growing e-commerce world, even with these % improvements in fraud discovery, the false positive % are still way too high. A false positive occurs when a legitimate card transaction is declined because the transaction is suspected to be fraudulent.

In general, Risk engines determine the legitimacy of online transactions by typically using historical data, behaviour patterns , and other characteristics, much in the same way that card present transactions are approved or declined. As a lot of us have experienced, having your card transaction declined when you know you are the genuine card holder is immensely frustrating, having your online transaction declined is equally as annoying.

Clearly, tackling fraud is important for the individual and businesses alike. Lexis Nexis 2011 True Cost of Fraud Study confirms just how much money is lost to such crime, a whopping $100+ billion!

Thankfully, preventing fraudulent activity needn’t have to annoy the genuine card holder by declining their purchase of the book from the online retailer simply because, historically, they just don’t buy books online.

Proximity Correlation Logic technology is a lot more accurate than analysing transaction history, and it works in real time. It is based on the fact that you are more than likely to have your mobile phone near you, say for example, in your pocket or handbag, when you are making an online purchase. The technology is smart enough to be able to detect whether your phone is in the vicinity of the origination point of a transaction whether that is at an ATM, a POS device, your home, your office, or other location, without compromising your privacy as it is not a Location Based Service. As an extra layer of security, the system can even call your mobile phone asking you to verify the transaction if extra comfort is needed, and if it really isn’t you trying to buy that book, you will be directed to your bank’s fraud team.

Simple.