Magazine article American Banker

Fight vs. Fraud Spurs Five-Bank First Data Deal

Magazine article American Banker

Fight vs. Fraud Spurs Five-Bank First Data Deal

Article excerpt

Concern that fraud is threatening consumer confidence in the payment system is prompting some banks to collaborate on new security measures.

Banks have cooperated in the past -- for example by supporting the industrywide security standards, issued by the major credit card companies, or by sharing data to identify the sources of security breaches.

And this week five large banks have banded together in an agreement to buy a fraud management company.

Bank of America Corp., JPMorgan Chase & Co., Wachovia Corp., Wells Fargo & Co., and BB&T Corp., have agreed to take equity stakes in a First Data Corp. subsidiary, Primary Payment Systems. First Data would retain a minority stake in the venture, which is to be renamed Early Warning Services LLC. The deal was announced Monday and is expected to close soon.

"All financial institutions have a responsibility to build a level of confidence in the system for the users of the payment system," said Paul Finch, the chief executive of Primary Payments, who is to remain CEO at the new company.

Mr. Finch said that fraud is growing, morphing into new ingenious forms every year, and that financial companies must "do everything they can to eliminate fraud from the system."

Two of the banking companies, BB&T, of Winston-Salem, N.C., and Wells Fargo, of San Francisco, already held small equity stakes in Primary Payments, but both would increase their ownership in it considerably through this deal, according to Leslie Altick, an executive vice president for Wells Fargo.

The plan is for Early Warning to allow the banking companies to share their fraud prevention expertise and assess risk when dealing with new and existing customers. The deal also includes IDLogix, a small First Data subsidiary that sells technology to authenticate consumer identification cards at retail stores. …

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