Barclays has become the first UK bank to install software which aims to combat fraud by keeping a watchful eye over high-street credit card transactions.
Barclays expects to invest around #3 million developing the system over the next five years, in conjunction with HNC Software, developer of the Eagle merchant risk management system.
The software will be used by Barclays' Merchant Services division, which handles purchases made by credit cards. Over 125,000 shops and businesses in the UK use Barclays Merchant Services for credit card transactions.
The Eagle system is claimed to be unique among risk management software systems. It uses neural network technology, storing and analysing the patterns of transactions on credit and debit cards. Having learnt from past transactions, both valid and fraudulent, the system can highlight patterns indicating where fraud might be occurring. For example, if a shop has an average daily deposit of #500 worth of card transactions, and suddenly starts paying in much larger amounts, the Eagle system will automatically alert Barclays to the unusual pattern, whereupon the bank would carry out a follow-up investigation.
In the long term, Barclays expects the system to save money by helping it become more focused on fraud. A pilot implementation of the system has already detected #75,000 worth of fraudulent transactions in the first three weeks of January.
"Managers are often unaware that their staff may be laundering fraudulent sales slips, or they may be pressurised by criminal gangs to pass counterfeit card transactions through their accounts," said Robert East, finance and risk director at Barclays Merchant Services. "Eagle will enable us to track these sudden, uncharacteristic retailer deposits and take immediate action if there are no legitimate reasons for such a dramatic upturn in business."
Fraud investigators can access the system using remote links on their laptops. The system is also linked to an existing Barclays Fraud 2000 system, which identifies fraudulent transactions during the authorisation process.
Barclays Merchant Services handles over two million card transactions a day. The bank expects to build up enough data to enable the neural network system to learn very quickly.
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