Extracted from "FC NEWSBYTES 1.3", David Geddes <dgeddes@NETCOM.COM> Editor, where FC = FutureCulture mailing list <FUTUREC-request@UAFSYSB.UARK.EDU>. strick ____________________________________________ _ _.......... B Y T E 4: Visa, HNC Inc. develop neural network as a weapon to fight fraud SAN FRANCISCO (AUG. 10) PR NEWSWIRE - Visa International and HNC Inc. have announced a strategic agreement to develop a comprehensive merchant risk detection system. The new system will be designed to better control fraud at the merchant level by determining the risk associated with individual card transactions. This agreement continues to support Visa International's active role in developing effective solutions to the problem of fraud occurring at the point of sale. The merchant risk detection system will be available in 1994. "Visa has combined its core systems capabilities and the premier technology available -- neural networks -- for fighting credit card fraud," explained Roger Peirce, Visa International's executive vice president, Delivery Systems. "HNC, an industry leader in neural network applications and credit card control services, is a logical partner for Visa," he added. Michael A. Thiemann, HNC's executive vice president, called the agreement "another example of our commitment to solving tough business problems through the application of cutting-edge technologies." Neural network technology enables a system to predict the probability of fraud by learning from a large number of past transactions, both legitimate and fraudulent. By using neural networks to its full extent, Visa will be able to provide superior risk analysis for its members. In combating credit and debit card fraud, Visa already has developed several programs utilizing information gained from neural network research. Worldwide implementation of the International Points-of- Compromise (IPOC) program has proved highly effective for identifying merchant locations that may be selling or giving account information to counterfeiters. Another successful program, called the Central Deposit Monitoring (CDM) program, matches merchant activity with sales draft laundering characteristics and identifies unusual merchant deposits. In addition, close cooperation with law enforcement agencies and legislatures enhances the value of the programs which, in turn, allow Visa members to pass on the protection to its cardholders and merchants. The planned Visa-HNC merchant risk detection system is designed to further reduce fraud losses by assigning a risk score to each authorization transaction processed through the VisaNet systems. "With this new system, members will be better able to assess risk at the point- of-transaction and, therefore, make more informed authorization decisions," confirmed Peirce. According to The Nilson Report, merchant fraud worldwide cost the financial industry an estimated US $689 million in 1992. HNC will integrate the risk score into Falcon(TM), their existing, real-time credit card fraud-detection system that runs at card issuer sites to identify and prevent a wide range of fraud at the cardholder level. It determines the probability of fraud on each credit card authorization by comparing it to the cardholder's purchase patterns and the latest trends in credit card fraud. Introduced in September 1992, Falcon has already achieved success in reducing fraud losses of major credit card issuers. HNC Inc., the world's leader in the application of neural networks, develops, sells, integrates and supports advanced decision solutions based on neural network and statistical technology. HNC provides practical products and services to the financial, credit card, debit card, merchant services, insurance, mortgage underwriting, retail and direct marketing industries. Visa is the leading consumer payment system in the world with more than 10.4 million acceptance locations, the largest global ATM network and 309 million cards issued worldwide. -0- 8/10/93 /CONTACT: Gail Murayama of Visa International, 415-570-3645; or Ken Jones of HNC Inc., 619-546-8877 ____________________________________________ _ _..........