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What is Credit Card pattern recognition?
Posted on March 5th, 2010 No commentsPattern recognition is a fraud prevention technique that is used increasingly by credit card companies. It is often the reason why credit card users will get phoned up by their credit card provider asking them whether they really did make a couple of large purchases.
Pattern recognition is simply analysis of a large number of credit card transactions. It comes in two forms, firstly pattern recognition searches for positive signs that the card is being used fraudulently and it then looks for differences in the way the card is being used from its normal pattern.
The patterns that credit card providers use to spot potentially fraudulent transactions are a number of purchases that are very close to the credit limit, buying a large number of items that are easy to sell on to another person and so convert into cash or physically using the card within minutes at two places that are very far apart. These objective signs are very easy to spot, and many credit card fraudsters tend to be aware of the dangers of following this behaviour. The quick wins that have come from spotting this behaviour have already been won.The next stage in the battle against credit card fraud has been to look at sudden changes in spending patterns. This is far harder for a credit card thief or fraudster to avoid unless they know the card holder very well and even then there may be some differences in expenditure.
The credit card companies use various types of fuzzy logic to analyse past transactions and build up a pattern of behaviour. This is not just to judge the sort of purchases that are made, but when and where these purchases are made, the frequency of these purchases and whether a credit card is used. Thus with every new transaction there will be a certain number of points that are added to the transaction for how far it is out of the pattern. Most transactions will have a small number of points. When there are a large number of points that have been amassed in a short period of time, which can be as short as a day, then a number of measures will be taken including contacting the card holder and suspending the card.
Going on holiday can be a particular problem here as not only are there a large number of atypical purchases being made in a short period of time, but they are being made in another country. In these cases it is often a good idea to phone up the card issuer in advance to warn them about the upcoming holiday, particularly if holidays are unusual for the card holder.
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