Visa says its new scam fighting team has gotten off to a quick start in its first year, stopping $350 million in fraud across dozens of attacks thus far.
Visa in early 2024 reorganized several cross-disciplinary teams — engineers, former law enforcement officials, data visualization experts and others — into one scam disruption service in an effort to combat a
The card network's practice leverages the company's vast troves of transaction and scam reports data to identify criminal rings that act as a drain on the payments network. The service fits into a broader Visa strategy to
The scam disruption service also aims to reduce consumer losses for a type of payments crime that often results in financial exposure for consumers. Although there are indirect costs of scams to payment networks such as Visa, these networks generally do not bear direct costs of unauthorized transactions. Instead, when a cardholder disputes a transaction with the issuing bank, depending on the circumstances, the issuing bank, the merchant or the merchant bank covers the cost of the unauthorized charge.
Scams, which by some definitions are authorized transactions, are different. Scammers often look to trick victims into paying for goods or services (even if those things are misrepresented) rather than try to steal their financial information. This can leave the cardholder liable for losses if these payments are determined to be authorized.
However, this does not stop cardholders from reporting transactions that, in the end, are their own liability. Plus, the facts of each disputed transaction are vital to determining liability, and elucidating these facts comes with costs.
In particular, each disputed transaction costs the issuing bank the minutes or hours that claims investigators must spend looking into the matter, and costs to issuing banks can translate into reduced revenue for the bank's vendors.
In cases where a charge-back is invoked — where the issuing bank demands the merchant and its bank pay back the transaction — the merchant bank can bear some of the costs.
If a payment network can reduce the number of hours a bank must spend on investigations — and the overall costs of fraud and scams — that will make the network more attractive to card issuers and merchant banks considering which of the few payment networks it wants to tap for card products and services. As Michael Jabbara, global head of payment ecosystem risk and controls, put it, Visa's scam disruption practice helps to make the network safer overall.
"Ultimately, we're about protecting the consumer," Jabarra told American Banker, adding that disrupting scam networks builds trust between Visa and consumers. He also said it helps build the company's trust with merchants.
Fighting scams also helps to disrupt the fraud ecosystem, which tends to overlap with the scam ecosystem and acts as a major drain on revenues for all involved parties. Payment card fraud losses worldwide reached $33.83 billion in 2023, according to
Jabbara said that if Visa doesn't disrupt the criminal infrastructure of scammers, they will just "show up in another part of our ecosystem," namely in the form of fraudsters.
A card network promising to shut down scam merchants also stands to gain favor with regulators — especially in Europe, where pressure has been rising on banks to bear the cost of scams.
Jabbara said there was not any particular compliance or regulatory motivation behind the scam disruption practice.
"No, this is very much just a good part of our evolving security strategy," Jabbara said in response to a question about regulatory or compliance efforts that might have inspired the consolidation of the new department.
One of the scam rings that Visa highlighted in its announcement involved romance scams, in which scammers trick consumers into believing they are chatting online with a love interest. Some headline-grabbing romance scams end in large-scale losses for the victim, who might believe they are paying for their love interest's well-being or investing in a wildly successful cryptocurrency.
Other ways of stealing money during a romance scam are less costly to individual victims but common enough to cause concern for the payment industry. In one common scheme, a scammer sends a phishing link to a mass email list of victims. The link looks like it goes to a legitimate online dating website.
As part of the sign-up process, the victim must provide their credit card information as part of what looks like an identity verification service. These scam websites create an opportunity for identity theft, but they also give the scammer an opportunity to set up recurring payments against the victim's card account, even if the victim believed they were just providing card information as part of an identity verification check.
Visa is not the first to organize a scam-fighting practice. In April 2024, its rival
Of the $350 million that Visa said its scam disruption practice saved consumers in its first year, $37 million of this connected back to these fraudulent identity verification merchants — 12,000 of them, according to the company.
"If you were paying attention, it would be a merchant name you wouldn't recognize, but maybe you'd think it was a parking thing, some beverage or some random kiosk somewhere," Jabbara said of how victims tend to overlook these small-scam transactions. The scammers are "very much thinking about how they can keep you on the hook for as long as possible," he said.
