MasterCard Wins Another Round Against Fraud.

PURCHASE, N.Y.--(BUSINESS WIRE)--May 11, 1998--

Total Fraud Level Falls to Historic Low As

Dollar Losses Decline by Record Amount

MasterCard International announced today that its ongoing battle against bankcard fraud continued in 1997 resulting in the lowest fraud to sales level since MasterCard began tracking fraud statistics.

Worldwide fraud basis points (the measurement of fraud against sales volume) for 1997 declined to 7.7, representing a 14.4% decrease in basis points and the lowest basis points level in more than ten years. This is the equivalent of 7.7 cents of fraud for each $100 of transaction volume, and compares to 9.0 basis points in 1996. Total dollar losses were $462 million - down from $499 million in 1996 representing the greatest decline in total dollar amount ever recorded. In addition, member fraud reporting has become more comprehensive than ever before, making this reduction even more significant.

"These statistics prove that MasterCard's continued efforts to combat fraud continue to pay dividends, increasing the profitability of our members and the security of MasterCard cardholders," said Joel S. Lisker, senior vice president, Security and Risk Management. "MasterCard's intense efforts have resulted in a downward trend in fraud basis points for five years in a row. While fraud trends are cyclical, we are optimistic that the advanced security features and technologies we have pioneered over the years will minimize members' fraud losses in the future."

Decline in Major Fraud Categories

MasterCard member financial institutions report fraud statistics to MasterCard's SAFE reporting system (System to Avoid Fraud Effectively). Nineteen ninety seven statistics show:

-- Counterfeit fraud decreased 25.2% over 1996, falling to its

lowest basis point level - 1.6 - since 1990.

-- Dramatic fraud decreases were recorded in the Asia Pacific region

- down 20.7% and in Latin America - down 33.5%.

-- Worldwide, the counterfeit category accounted for 20.5% of total

fraud, down from 25.4% in 1996.

-- Losses due to fraudulent applications for credit cards

declined 3.6% due to continued communication of best

practices and educational efforts.

"Counterfeit fraud had been a major growth area, and the decreases we saw in 1997 are encouraging," Lisker said. "As expiring cards are replaced around the world, security features and technologies - including neural networks and other sophisticated techniques - will make counterfeiting and other forms of fraud even more difficult. Ultimately, biometric solutions will all but eliminate fraud."

MasterCard Security Initiatives Combat Fraud

MasterCard has led the industry in the development of security features such as the first tamper-evident signature panel, the use of three-dimensional holograms, and card validation codes (CVCs). CVC1 provides the best protection against counterfeit fraud activity and CVC2 gives banks a way to verify that a cardholder has the card in hand when requesting an address change, new card order, or a new PIN.

Building on this history of security innovations, MasterCard continues to lead the industry in researching and piloting new security initiatives that strengthen fraud prevention even as criminals who perpetrate fraud develop new schemes and technologies.

These efforts include the upcoming launch of a cutting-edge fraud predictive technology based on neural networks - mathematical algorithms that detect patterns of behavior. The system, which MasterCard plans to test later this year, will provide member institutions with additional tools to identify fraudulent transactions.

Over the next year MasterCard also expects to implement a real-world biometrics pilot program involving one or more innovative members. Since 1995, MasterCard has been studying the use of biometric technologies - which use unique physical characteristics to identify individuals. Among the most promising of these technologies is finger minutiae which turns characteristics of a fingerprint into a unique algorithm, which then can be stored and matched on a chip embedded in the card. MasterCard has been conducting an internal pilot that uses finger minutiae technology at its global headquarters in Purchase, New York.

"MasterCard is leading the industry in development of new fraud-fighting tools," said Lisker. "We estimate that a finger minutiae system, when fully implemented, could save the financial services industry billions of dollars. Over the long term, technologies such as neural networks and biometrics could dramatically reduce the cost of fraud to both cardholders and members."

MasterCard International has the most comprehensive portfolio of payment brands in the world. With 23,000 member financial institutions, serving consumers in 220 countries and territories, MasterCard is the industry leader in quality and innovation. More than 600 million MasterCard(R), Maestro(R), Cirrus(R) and Mondex(tm) cards are accepted at more than 15 million locations worldwide. In 1997, gross dollar volume exceeded $600 billion. MasterCard can be reached through its World Wide Web site at http://www.mastercard.com.

CONTACT: MasterCard International, Purchase

Edward Dixon, 914/249-5028

[e-mail]

or

Shandwick, New York 

Julie Jacobs, 212/309-0620

[e-mail]