If you've done much traveling, then it's certainly happened to you. It's your first day in a new city and you present your credit card for payment and things grind to a halt.
Depending on the circumstances, the transaction may require the clerk to check your identity, or it may require that you speak to someone at the credit card company so that you can confirm that it's really you that's buying lunch in London or Paris, or in my case in Frankfurt, Germany.
And it might not even involve international travel. You might find yourself having to prove who you are in New York or San Francisco. What's happened here is that your purchase triggered the credit card company's fraud analysis system and they need to make sure that whatever it is that you're buying is a legitimate purchase.
Normally such requirements for proof are simply annoying, but every so often they can lead to the denial of a charge, which can be a real problem. The security folks at Visa International think they've found a way to prevent this sort of inconvenience by tying the location of your phone to the location where your credit card is being used.
"This really ties into a lot of our core processing," said Visa's senior vice president of risk products and business intelligence Mark Nelsen. "Every time you use your Visa card we determine the likelihood of fraud." Nelsen said that Visa examines every charge that way. Of course so do other credit card companies including MasterCard and American Express. In fact, it was a purchase at the Frankfurt Airport several years ago that developed into my most recent call from American Express to confirm a charge.
Normally you can avoid this sort of thing by calling your credit card company or your bank and letting them know of your travel plans. But when your plans change, perhaps because of an unplanned layover, you can get those calls again.
Now Visa is tying your actual location, as determined by your smartphone, to the location of your card transactions. The way this works is through the banking app that you've downloaded to your phone. That app will know where you are even if you haven't opened it and it will report your location to Visa. "Visa would compare your phone location and purchase location," Nelsen said.
What's actually happening behind the scenes is that Visa and other credit card companies are computing the likelihood of fraud for each purchase. That likelihood is presented to the issuing bank as a risk score, and the bank decides what level of risk is acceptable to it. When the risk score goes above a certain point, it triggers a confirmation call and ID check or in some cases it causes the charge to be declined.
There are some obvious holes in this plan. For one thing, customers must have the banking app for the credit card they're using. For travelers with Windows Phones or BlackBerry devices, this may not be possible.