HSBC fights fraud with SAS analytics

Global financial services firm HSBC Holdings has teamed up with software developer SAS Institute Inc. to fight payment card fraud through “intelligent” fraud detection.

Cary, NC-based SAS is currently completing the development of software that applies business intelligence and analytic capabilities to HSBC’s fraud detection, prevention and management system, according to T.J. Horan, fraud products strategist at SAS.

HSBC is scheduled to rollout the new system to its North American locations by mid next year. Asia Pacific and European implementations will follow suit through 2007 and 2008, Horan said.

The new software provides a range of case management, analytics, simulation, rule-writing and reporting tools all on one system, he said. This allows HSBC to consistently manage fraud exposure and its impact on customer service to card holders, he said.

The software would enable HSBC to monitor in real time account activities such as types of goods purchased, change of address, payment patterns – and use SAS analytic tools to score accounts and determine the probability of fraudulent activities.

Trend monitoring and analysis, as well as real-time information flow would also enable the financial institution to prevent fraudulent transactions right at the point of sale, said Horan.

The software’s reporting and predictive capabilities would equip HSBC with valuable data that could then be used for developing standard best practices and case management systems across the HSBC organization, the SAS executive said.

The RCMP has reported that some $200 million dollars have been lost in 2003 due to payment card fraud.

HSBC currently employs different systems for its fraud detection processes across all of its organizations worldwide, which includes over 9,800 offices in 77 countries. HSBC is one of the world’s largest issuers of bankcards, responsible for more than 100 million debit and credit cards currently in circulation.

HSBC hopes to achieve a single, unified system across all its worldwide operations that can transcend language barriers and can adapt to the ever-changing landscape of card fraud.

“Our venture with SAS will become a common standard and we will deploy it to all of our businesses. This will give us an added advantage as all our staff will use the same technology,” said George Lennox, manager, HSBC Group Credit, based in London, UK.

He said using the SAS-built system, HSBC would build up a profile of customer spending patterns and constantly run them against known criminal spending patterns. Making such information available as a common resource for all HSBC offices would enable the company to more efficiently prevent or detect fraudulent transactions.

“It is vital that cardholders [be] free to transact with confidence, especially [through] new channels such as [the] phone and Internet. We believe we will reduce refers and delays, and this will help build [customer] confidence,” Lennox said.

HSBC and SAS have also been working closely with other financial organizations to form a “broader consortium” that would utilize the SAS fraud detection technology to reduce criminal activity in the card space.

SAS, however, declined to disclose the names of the other financial organizations saying it is “premature to comment” at this time.

With the new SAS software, HSBC expects to gain higher fraud detection rates, reduce fraud losses and provide better customer service, Lennox said.

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