March 6, 2012

Long Island Rail credit card system combats fraud

The New York Metropolitan Transportation Authority's (MTA Long Island Rail Road (LIRR) expects to save more than $5 million this year as a result of a recently implemented new credit card verification system at its station ticketing machines aimed at combating credit card fraud.

Credit card fraud at LIRR ticket machines peaked in May of last year before installation of the new system, which requires customers to provide their zip code as part of the verification process.

The LIRR and MTA Police worked closely together to address the problem.  The LIRR arranged for the development and implementation of the zip code verification software for its ticketing machines. At the same time, the MTA Police stepped up credit card fraud investigations — effecting 35 arrests in 2010 and 2011. 

Over the course of several months in the latter part of 2011, the LIRR added a zip code verification system for the credit card purchases made at its 272 ticketing machines systemwide. The verification system requires customers that are making purchases at the machines in enter their zip code, similar to the verification system used at many gas stations throughout Long Island. 
 
In tracking fraudulent charges, the LIRR noticed a significant increase in credit card fraud at the ticketing machines over the last year. In the prior years, credit card fraud represented less than one-half of one percent of total credit card sales. However, in the 2010 and going into 2011, there was a sharp upswing in the fraudulent activity, where credit card fraud climbed to more than 2% of the LIRR’s total credit card sales at the machines.

A pilot program started with the installation of the security verification software at eight machines in May 2011. The program was expanded over the remainder of the year to cover all LIRR ticketing machines.

The cost of the fraudulent purchases reached a high of nearly $545,000 in  May 2011. 

With over 75% of the ticketing machines equipped with the anti-fraud measure by September 2011, the losses dropped precipitously to just over $90,000 in October. Upon completion of the installations in December 2011, the fraudulent activity plummeted to four hundredths (0.04) of a percent of total credit card sales, or $11,000 in January.

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  • R Troy[ March 7th, 2012 @ 1:19pm ]

    For quite a few years, Walmart and many other store chains have required the zip code be entered for credit card purchases. Warehouse clubs already have id based on membership cards. But the LIRR is proud of making this discovery long after nearly everyone else made it. Some day LIRR may discover new ways of 'fare collection' too. For instance, in many transit systems before one boards a bus or trolley or train, one either buys a fare and validates it for that ride, or validates an earier purchased fare - for this ride, or at the beginning of a designated period validates a period (day, week or month in most cases) pass. Spot checks are made of the printed validation or the validated pass. People who cheat are found and fined heavily. This is used in many places, not just the US. But my guess is that it will take LIRR decades more before they discover it too.

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