So, how does it work?
The software analyzes 500 pieces of data, including location and past transactions, in less than a second. Based on that data, the software creates a risk score on a scale from zero to 99. The higher the score, the higher the risk that the card in use is stolen. Each gas station gets to set a risk threshold, say 50 on that zero-to-99 scale. If your card generates a risk score that exceeds the threshold, a message will flash at the pump for you to see the attendant inside the station.
"If a fraudster gets that message, they're going to drive away. The genuine consumer is going to go to the attendant to finish the transaction," said Mark Nelsen, Visa’s vice president of risk products and business intelligence.
The Visa Transaction Advisor, as the software is called, pulls on data the company has collected on cardholders and existing fraud detection technology -- the kind already in use to monitor suspicious activity on credit and debit cards. What makes this software different is the involvement of merchants, who can ask for additional verification once the customer receives the alert to see the attendant.
It is difficult to pinpoint the amount of payment fraud that occurs at gas stations, though some analysts say its four times the average for other forms of retail. Researchers at Nilson Reports say global payment fraud has crept up in recent years, though rates remain at historic lows. Six cents of every $100 in transactions, they say, is tied to fraud.
"Gas stations are a challenging environment because of the self-service," Nelsen said. "It's also a place where criminals can test out lost, stolen and counterfeited cards to see if they're working, and then they can go use them other places."
He said Visa saw an opportunity to provide gas stations added fraud protection since it will take those merchants longer to upgrade their pumps to accept EMV smart chip cards -- plastic cards outfitted with a microprocessor that stores and transmits encrypted data that makes it difficult to counterfeit. Visa and MasterCard have given all players in the payment system -- the banks that issue the cards, merchants that accept them and financial firms that manage the transactions -- until October 2015 to upgrade to the technology or bear the cost of fraud. But gas stations have been given until 2017 because it will cost them more to replace card readers embedded in the pumps with devices capable of accepting the chip cards.
"It's going to take longer for gas stations to deploy the technology, so we're getting that risk intelligence down to those stations so they can better protect their consumers and themselves," Nelsen said.
Chevron tested the software at 300 of its locations in Southern California over a two-month span. Gabriel Andres Porras, merchant acquiring manager for Chevron, said the company jumped at the chance to weed out fraud in its network. He would not provide exact figures on the extent of the problem, but said fraud is definitely a concern for the company.
"It can be a major inconvenience for our customers and retailers," he said, which is why the Visa software was so appealing. The "service occurs behind the scenes, and will not change the experience at the pump for the average customer."
Visa's new software is available through participating acquirers, the financial institutions that process credit card payments for merchants. Visa charges those institutions a fee for each transaction it monitors. It is then up to the acquirer to set the cost to the merchant. While Visa would not disclose the amount it charges, Nelsen said the company has priced the software "to get mass adoption" and to "have a positive return on investment for merchants."