Having your card declined while you’re traveling can be embarrassing, annoying and even distressing, if you’re trying to use it in an emergency. Unfortunately, it’s a necessary evil, as it’s part of your bank’s mission to prevent fraud; if someone is buying train tickets from Paris to Milan, and you live in Phoenix, the bank may block the transaction and wait for you to call and confirm it.
Visa and MasterCard, however, are rolling out some solutions that could benefit frequent travelers. By collecting location data via your phone and ticket purchases, card networks can give banks a better read on your whereabouts – and the ability to more confidently approve the transaction if it seems you’re actually at a train station in Paris.
We asked Visa and MasterCard how these solutions work – and what they mean for your privacy.
Visa’s Travel Authorization Tag
This is a behind-the-scenes service Visa offers to issuers. If you buy a ticket (such as an airline or cruise ticket) with your Visa card, Visa shares relevant information about your plans with your bank, including projected locations and dates.
“If you bought a ticket for a cruise that’s leaving out of Florida, Visa now knows that the cruise begins in Florida,” says Mark Nelsen, senior vice president of risk products and business intelligence for Visa. “So if you’re using your card in Florida at the time of the cruise, there’s a match. We send that match indicator to the issuing bank, and they can use it to more confidently approve the transaction.”
Phone-based geolocation services from Visa and MasterCard
If your mobile device (and, by extension, you) is in roughly the same location as the place you’re using the card, it stands to reason that you’re probably the one making the transaction, right?
That’s why MasterCard and Visa are both working on similar solutions that use your phone’s location, compare it to where the card is being used and pass that intel on to your bank when you make a purchase. MasterCard’s is called MasterCard Locations Alerts (developed in partnership with telecommunications technology company Syniverse), and Visa’s is called Visa Location Confirmation.
Up to 80 percent of transactions declined when consumers travel overseas are actually legitimate, says Bernhard Mors, vice president of corporate communications for MasterCard. Confirming the card and mobile device are in close proximity allows the bank to be more certain in approving legitimate transactions – and also more able to accurately decline fraudulent ones.
“For example, if a consumer and his phone are in London, and we see an attempt to make a payment transaction at a point of sale in Frankfurt or Dubai, very likely this is not a legitimate transaction, and therefore it would be declined,” Mors says.
This means consumers shouldn’t have to worry as much about card rejection across the world, and banks will have fewer customer-service snags to deal with.
“Apart from helping to reduce fraud, this solution gives cardholders the confidence that their card will be authorized when they travel abroad,” Mors says. “Fewer wrong declines also reduces the cost for issuers interacting with their customers.”
For both Visa’s and Mastercard’s service, you’ll opt in via the bank that issued your credit card. Visa turned on Location Confirmation for issuers in April 2015, and it’s now being tested by a major bank, Nelsen says, with several other banks in the process of incorporating it. Nelsen estimates that some consumers will start to see the service integrated into their banks’ mobile apps in fall 2015. MasterCard is pilot-testing Location Alerts in several markets and anticipates bringing it to market in Q3 2015, Mors says.
Once you’ve opted in to the service via your issuer, you won’t have to do much else, Mors and Nelsen say.
“It’s really just running behind the scenes,” Nelsen says. “You don’t have to log in to the app or anything.”
How often Visa updates your location depends on where in the world you are, Nelsen says.
Once you opt in with your bank, the technology will determine your home location automatically, based on two weeks of information. If you’re within 50 miles of that location, Location Confirmation updates Visa with your whereabouts just once a day. If you travel more than 50 miles from home, Visa gets an update – and another whenever you then travel more than five miles from that update. If you spend a couple weeks in the same area without moving, that becomes your new home location. The latest update is the location Visa will pass to your issuer when you make a purchase.
So what happens if your phone is turned off – or not connected to the network? It doesn’t necessarily mean your transaction will get rejected, Mors and Nelsen say. If the phone is off, the issuer will revert to its standard validation process, Mors says, to authorize or decline the purchase.
As for Visa, the Location Confirmation data is just one of 500 data points that go into the “risk score” Visa generates for each transaction. Location Confirmation will designate the phone’s location as a match, a non-match or “unknown,” Nelsen says.
“So if your phone is turned off and there hasn’t been an update in 24 hours, we simply say we don’t know. We send an ‘unknown’ indicator to the issuer, and it doesn’t affect the risk score, and it doesn’t affect their positioning for that particular transaction.”
Don’t want your issuer tracking you this way? No problem. Don’t opt in.
“When you download the bank’s app on your phone, it would say, ‘Would you like to participate in this and share your location information for fraud detection purposes?’ ” Nelsen explains.
If you do opt in, Nelsen notes that issuing banks using the service are required to agree they will use location data only for fraud detection – not marketing. And if you opt in and decide to opt out, all location information collected by the service will be erased.
“It’s all about convenience,” Nelsen says. “If you’re traveling a lot and you’re getting declined, then this would be a super convenient feature. If you’re someone who really doesn’t like it, you don’t have to opt in.”