Define ‘suspicious’ activity
TESS VIGELAND: The TJX Company revealed this week that information from more than 45 million credit and debit cards was stolen from its stores. TJX owns TJ Maxx, Marshalls and other retailers. Most of those customers probably would have been fine with their credit card companies canceling the cards. But sometimes, that happens even if there hasn’t been any fraud. The card company just thinks there might have been and shuts off your card. So it got us curious, just how do they define suspicious? Ted Crooks is vice president of products for Global Analytics. Mr. Crooks, first of all, just how bad is the fraud problem?
TED CROOKS:
It’s used by almost all forms of organized crime as a form of working capital, and a way to get anonymous funds. And as a result, every time the banks do something to try and reduce fraud without making things too inconvenient for consumers, at the same time, the fraudsters adapt.
VIGELAND:
So how does the credit card industry come up with its methods for tamping down on this kind of thing? What’s the math behind this?
CROOKS:
The solution that’s in place today is one developed about 15 years ago. It’s used by 85 or 90 percent of all bank cards in the United States. And that’s a system that uses a neural network.
VIGELAND:
What do you mean by a neural network?
CROOKS:
We were trying to build something that was like the old-fashioned bank teller in a smaller town, who is a little too nosy and knew everybody’s business, and could tell when things were fishy. And, in fact, programming common sense like that is next to impossible. But it was possible to build a program to learn common sense within a narrow field of knowledge. So we’ve built these programs that learn how people behave with their credit cards, and learns different kinds of people and different sorts of behavior. And then it goes on to learn about each individual account and how it normally behaves.
VIGELAND:
But the computers really don’t have common sense? So, you know, we have heard stories here at Marketplace about people getting, you know, alerts or having their credit cards put on hold for even going to, you know, a new gas station, and their credit card is declined. Is there a way to balance the convenience that the consumer needs with everybody’s need to, you know, not have fraudulent credit card use.
CROOKS:
What you don’t know is the 120 other cards that went through that gas station earlier in the day, 85 of which were stolen. Then all of a sudden, your card looks like may be it’s stolen.
VIGELAND:
Wow.
CROOKS:
Those are the kinds of things that do happen.
VIGELAND:
Yeah.
CROOKS:
But overall, the system today loses about 6 cents out of every hundred dollars goes to fraud, a lot less than goes to other inefficiencies in the system. And generally, credit cards are very convenient to use. But we’re going to live with a certain amount of fraud. And we’re going to do better mathematics. The next step after neural networks, the things that we’re working on these days are systems that use antibody approaches.
VIGELAND:
How does the antibody system work?
CROOKS:
It looks at hundreds of millions of possible combinations of transactions, and recognizes those that individual fraudsters or fraud rings have found popular lately.
VIGELAND:
And it seems like, as consumers, we just kind of have to get used to the fact that, sometimes, our cards may be shut off because of this mathematical algorithm that’s telling the card company that there might be something wrong.
CROOKS:
That’s exactly right. And the best solution is carry two cards from two different banks. And read your statements. Make sure nobody else is using your card.
VIGELAND:
Ted Crooks is vice president of products for Global Analytics. Thanks so much for coming in. And I promise I won’t make fun of your last name.
CROOKS:
That’s quite all right. I didn’t choose it.
VIGELAND:
This is Marketplace Money from American Public Media.
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