Sunday, June 29, 2014

If Brazil's ATMs Are Getting Stingier and Stingier Blame It on Falcon

Did you know that when you withdraw money at an ATM machine you are being watched?
Would you ever think that any single money transaction you make is carefully scrutinized by sophisticated computer systems that look at any detail of what you do?

Welcome to the new world of international money transactions, dominated by sophisticated neural network software systems which keep track of your money patterns.
Among these systems Falcon Fraud Manager is recognized as the leading global payment card fraud detection system, protecting 85% of credit card transactions in the US and 65% of credit card transactions worldwide. 20 of the top 25 financial institutions worldwide use Fair Isaac's fraud detection solutions.
In the UK, Barclaycard's fraudulent activity was reduced greatly in the last few years, whereas Falcon Fraud Manager dominates the market in the US.

Falcon Fraud Manager belongs to Fair Isaac Corp., a company well-known in the US to calculate your credit score too (so called FICO score). The anti-fraud software was developed, among others, by Bob Holmes in San Diego, California, and it has been so successful that it has been largely adopted by the financial industry.
Fair Isaac Corp. claims that its Falcon Fraud manager dramatically dropped the level of credit card frauds at home and abroad for the banks using it.
So everything looks wonderful for the industry, and for us who now feel more protected, right? Wrong.
Whereas virtually all of us are protected by fraudsters with these systems there is another thing we should look at: we are being watched, we share our decisions with our banks, we might even have to limit our travel plans.
The way Falcon Fraud Manager works abroad is not that sophisticated at all, as Fair Isaac claims.
In simple worlds it divides the world into low-risk countries and high-risk countries. Risk management teams of banks receive this piece of information and now they act consequently: they stop your transactions.
The famous "error in communications" is the result of it and, if you are in Brazil (sometimes even if you communicate it to your bank), all the ATM withdrawals might be stopped.
It does not matter if you go to the Visa ATM of Banco do Brasil, Bradesco, or any other bank. It does not matter if you use one, two or even more credit or debit cards: the result is always the same: "error in communication".
Why? Simply because you are in Brazil, a high-risk country for the Falcon Fraud Manager system. So your transaction is going to be stopped.
If you are in any other country in the world classified by Falcon Fraud Manager as high-risk country the result is going to be the same.
To be honest it is a decision of the bank not of the Falcon Fraud Manager software. It is your bank which declines the transaction. However it is likely that any foreign bank using Falcon software will give the same output: "error in communications", as the input is the same too.
And does the customer know it? It does not. Does your bank inform you about it? It does not. Let's see what Barclays answers about that for instance:
"In Brazil there is not a blanket block as it were, but until we are certain it is the actual customer who is there then a weekly withdrawal limit of £200 is applied. We are unable to update customers with our risk policy nor is it something we would actively look to share."
In fact not even the 200 pounds limit is respected by Barclays, as shown by the long lines of Brits who received the "error in communications" message at ATMs in Salvador da Bahia.
In addition this is something new: until three months ago the hated message never came up on ATM screens in Bahia. It is probably a new and more restrictive application by banks' risk management systems of the input coming from Falcon Fraud Manager software.
But what does this mean in practical terms? It means that the tourism spending patterns for countries like Brazil are going to be severely impacted by the restriction on money withdrawals for foreign travellers. In other words every travel expense that is not planned in advance might be restricted and this will affect even more the tourism industry in Brazil.
But at the end of the day, even if Brazil is classified a high-risk country it is our decision to go there right? Why should we be restricted in what we do?
Published in February 2007 in

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