Payment fraud is on the rise. Hackers have quickly realized that the most valuable bit of identity data to steal isn’t the social security number, but rather payment card information. It’s precisely for this reason that major data breaches at retailers like Target and Home Depot are on the rise.
In total, more than 100 million Americans have had their card stolen via a large-scale data breach in the last year alone. In fact, there have been a staggering across 1,720 known data breaches in the last three years, causing card fraud to nearly double over that period.
So, the obvious question remains, what can consumers do to combat this trend? Short of relying on large corporations to employ better IT security or avoiding payment cards altogether in favor of cash, the answer is to catch fraud sooner so as to limit its impact.
Many cardholders expect their banks to catch fraud on their behalf, but the reality is that less than 50 percent of known fraud instances are caught by banks. Rather, in most cases it’s cardholders that notice and report this suspicious activity. Which is why we have all been told, time and again that the best way to prevent credit card fraud is to closely monitor our payment account activity. The problem is, this is the kind of tedious and detail-oriented work that humans are ill equipped for. Software on the other hand, is well suited to this task.
Enter BillGuard, the financial security and fraud monitoring startup that today helps more than 1 million consumers monitor their payment card activity. Today the company is extending that service through a partnership with Experian Data Breach Resolution, the world’s largest identity theft monitoring company.
Together, BillGuard and Experian will offer what they describe as “an advanced identity protection suite” under the Protect My ID brand. Customers of this service will get access to three bureau credit monitoring, 24/7 live call customer service (with US-based agents), and real-time scanning for card numbers being sold online.
The companies write in a launch announcement today:
Fraudulent use of compromised credit cards and debit cards now accounts for more than 85 percent of all identity theft, which causes nearly $ 25 billion in financial damage in the U.S. each year. Over 40 percent of American consumers have experienced card fraud in the past 1 five years, and there’s been a dramatic increase in the volume of existing card fraud (ECF) – from $ 8 billion in 2012 to $ 11 billion in 2013. Financial institutions detect less than half of ECF, leaving cardholders to catch the rest – or personally absorb the financial loss.
While Experian can monitor the creation of suspicious new credit accounts and claims, prior to this partnership, the company could not view granular transaction-level data within consumers’ payment card accounts. Now, thanks to this BillGuard partnership, that is no longer the case.
The typical lifecycle of a stolen payment card credentials – when stolen in bulk – is that hackers first conduct micro-transactions on each card to confirm their validity before attempting to sell them to fellow bad actors. Individually, these transactions, which are typically less than $ 10, might not set of red flags among card owners. But in bulk, and thanks to the big-data monitoring power of BillGuard, it becomes trivial to identify and act upon this fraudulent activity.
“It turns out that crowdsourcing is the ideal method of identifying fraudulent transactions that banks and consumers can easily miss,” says BillGuard CEO Yaron Samid. “We have helped our users who are breach victims alone identify and recover $ 17 million worth of fraud activity this year.”
As much as the Experian partnership makes sense from a data-sharing perspective, it could prove equally valuable as a distribution and monetization channel for BillGuard. As the most popular fraud monitoring option around, Experian will help BillGuard get its one-year-old service in the hands of as many consumers as possible.
“It’s a really important time in the security industry to go beyond social security number protection,” Samid says. “What we’re seeing is that we need to get BillGuard out to as many people as quickly as possible. The Targets of the world pay to give free monitoring service to their data breach victims.”
As you might guess, BillGaurd will get a piece of this revenue stream, making this a potentially lucrative partnership, as well as a highly strategic one.
“The biggest misconception in the market is that most people think, ‘My bank will catch it for me,’” Samid says. The truth is, they catch less than half of all fraud instances. Consumers need to be vigilant and we believe we’ve created the best tool in the world to monitor card activity. This is not business as usual. We’ve got to innovate our way out of this to really protect consumers.”
BillGuard is a personal finance security app that utilizes crowdsourced big-data analytics to help consumers detect fraud, billing errors and unwanted (“grey”) charges on their credit cards and debit cards.