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US company FICO, has been combating financial fraud for 60 years using sophisticated AI, credit scoring and analytics.  Today it protects 2.5 billion card accounts, and nearly two-thirds of all credit card transactions. A key part of its service uses SMS to help prevent fraud at the point of sale.

Gabriel Hopkins, senior director of product management at FICO recently spoke to MEF Minute’s features editor, Tim Green, for MEF’s free Future of Messaging Guide to discuss the central role of messaging in combating card fraud.

Every time a bank flags up what it thinks might be a suspect transaction it has three choices: decline it (and risk annoying an honest customer); approve it (and reward a criminal); contact the cardholder to see if it’s genuine. The latter is clearly the best option.

But for years it was not possible. Now, thanks to smartphones, it is. Which is very interesting to FICO. The US company has been combating financial fraud for 60 years. More accurately, it’s been in the business of credit scoring and analytics. The company began by applying maths to the probability that a person could pay back a loan.

Before FICO, such decisions lay at the whim of the bank manager. The obvious superiority of the FICO system meant the company grew rapidly. It became an expert in using advanced analytics to detect and predict all kinds of consumer behaviours, including abnormal activity that could be fraud.

Today, FICO protects 2.5 billion card accounts, and nearly two-thirds of all credit card transactions. It does this mostly via its Falcon Fraud Manager software, which uses artificial intelligence to help financial institutions detect fraud – with minimal impact to customers. FICO says Falcon reduces losses from payment card fraud by up to 50 per cent.

And a key reason it can do this is the simple text alert at the point of sale. FICO added a mobile dimension to Falcon when it acquired Adeptra, whose solutions integrate voice, SMS, email and other channels back into a business’s host system. Today, its Customer Communication Services function sends 300,000 texts a day to customers in the EU and 150,000 to cardholders in the US and Asia respectively.

Gabriel Hopkins, senior director of product management at FICO, says: “Previously, banks had desks of fraud analysts and basically they would call and ask ‘did you buy this iPad?’. Well, we automate the hell out of that process. And recently we added SMS as an option for contacting the cardholder. It’s a fantastic channel. It helps us deal with high volumes without hiring more people. And, more important, customers like it.”


Why do they like it? Well, partly it’s practical. A customer in the middle of a transaction might not take a call from an unknown number. SMS is also asynchronous, so a cardholder can read the alert and respond when convenient. FICO works with messaging aggregator OpenMarket to ensure texts are sent (and arrive) promptly. But even when a message is delayed (because a recipient is out of range, for example), it is still productive.

Hopkins explains: “Obviously, immediacy is good when you’re tackling fraud as it happens. But if a person gets a text a minute later or even 20 minutes later, it can be reassuring. As a customer, you might trust a card more if you get good communication.”

Water proof

Adding this extra layer of security to card transactions has had a huge impact. Hopkins says it saves one bank customer tens of millions of pounds in a year. And it’s not just banks that benefit. FICO has also worked with Thames Water to automate voice and text calls to customers with overdue bills. These customers can pay without ever having to speak with a collections agent. And they do. In the first seven months of using the FICO system, Thames Water sent 345,000 automated voice calls and 95,000 text messages. It collected £10 million.

Now, FICO is keeping an eye on new messaging behaviours to ensure it reaches customers in their chosen channels. It’s looking at chat apps, and also push notifications.

But it believes SMS will always have the edge. “The OTT platforms can offer a richer experience,” says Hopkins. “There’s the scope to put in a bank logo and more contextual information. But against that, they are closed and mostly they require the user to initiate the connection. The great thing about SMS is that it’s open. No one has to set anything up. It just works.

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The Future of Messaging Guide explores the uses cases, platforms and technologies that are changing the landscape of messaging globally. From A2P to OTT, chat bots to smart machines, we explore how the world’s most powerful medium is shaping up for tomorrow.

The guide features over 25 cross-sector case studies and exclusive interviews that examine the power of messaging in all its forms from the humble SMS and chat apps to emerging platforms and explores what’s next for messaging.