Publications & Resources

January/February 2008
Focus: Compliance

Protect Your Bank and Your Customers Against Bank Card Fraud Losses with the Bank Card Protector Policy

By Anne K. Scully, WIB Service Corporation President

“We may need to solve problems by removing the cause but by designing the way forward even if the cause remains in place.” 
- Edward de Bono (British Author & Physician, 1933-)

Check card fraud. Counterfeit debit cards. Skimming. Lost or stolen check card. Identity fraud.  Internet phishing. Pharming. These terms can twist a community banker’s stomach in knots.

Utter two other simple words – “data breach” – and watch the reaction of bankers and their merchants. It isn’t pretty. 

In our fast moving, technology driven society, consumers not only rely on – but have also grown accustomed to and expect – the convenience of ATM, debit and credit cards for all kinds of financial transactions. But, with technology comes the increased risk of exposure to bank card fraud and compromise and misuse of customer payment data. And the fallout can be significant:  banks suffer financial losses from card fraud; when fraudulent transactions result from a compromise and/or misuse of payment data, banks whose customers and accounts were impacted suffer financial losses, loss of consumer confidence, remediation expense and reputation loss.

The WIB Service Corporation can’t protect your bank from fraud. However, we can help you withstand the potential onslaught of fraudulent bank card activity through a new insurance product offered through WIB-endorsed VIP Independent Bankers Insurance Services (IBIS):  The Bank Card Protector (BCP) Policy. 

The BCP Policy provides three valuable coverages:

Electronic Terminal Fraud – Your bank is covered against any loss resulting directly from the unauthorized use of a bank card at an electronic terminal – ATM, POS and Cash Dispensing Machine. 

Telephone, Mail Order and Internet Sales Fraud – Your bank is covered against any loss resulting directly from the unauthorized use of a bank card in a telephone or FAX transaction, regular mail (USPS) transaction or Internet transaction when approved or Verified by Visa or Master Card SecureCode (e.g., “card not present” transactions).

Compromised Cards Extra Expense – Your bank is reimbursed for the extra/direct costs to reissue cards that were reported compromised at a third party location by Visa or Master Card.

Skimming/ Phishing/ Hacking/ ID Theft – Your bank is covered from losses from:

  • Skimming – theft of card information by copying account information;
  • Phishing – theft of account information when the attacker sends an email purporting to be from a valid financial or eCommerce provider;   
  • Hacking – theft of card information from a merchant database or merchant processor; and
  • Identity Theft – when card information is used as a result of Identity Theft.

Other Advantages of the BCP Policy:

  • Worldwide Coverage: The BCP Policy covers losses on fraudulent transactions that occur outside of the United States and Canada. This is important because fraudsters don’t confine themselves to geographic boundaries – nor should your coverage!

  • Reasonable Premium Costs: The typical annual premium range is approximately $180 per $1,000,000 of annual card transactions.

  • Low Deductibles: The per card deductible is only $1,500.

  • No Adverse Experience on a bank’s financial institution bond.

  • Program underwritten by AIG (A+ rated).

What kind of fraud losses have been covered?

  • A community bank had a customer’s card skimmed while on vacation and used in Brazil . More than $12,000 was taken out of the account before the customer returned to discover the loss. The bank used a neural fraud detection system and read their foreign transaction report but had been notified by the customer that he was out of the country on vacation.

  • A community bank in the west had a customer living in an assistant living facility. The customer’s card was stolen along with the PIN by an employee of the facility. The thief took approximately $9,000 from the account. Since most of the transactions were PIN-based, the neural fraud system didn’t respond early enough to shut down the card.

  • A data breach at a restaurant caused a community bank to have over 20 cards breached causing a total loss of over $38,000 before a CAMs report was ever released. Most of the fraudulent transactions were made in Mexico.

For further information, contact: Pat Corey, IBIS (480-663-3778; pcorey@ibisinsurance.com)

Unauthorized reproduction of all or part of this material without the express written consent of the author is strictly prohibited. All rights reserved.