By Mark Huffman

September 18, 2009
Many third-party marketing agreements, in which one business shares consumers' credit information with another business, results in unauthorized charges on debit and credit cards.

While these charges can be disputed, it's a headache for consumers. If they don't notice the charge for a month or two and end up paying it, its almost impossible to get a refund. has received hundreds of these complaints over the years, including one recently from Sherry, in Meadow Vista, Calif. But Sherry also suggested a solution.

Why don't we require the banks to send out an electronic notice to have us consumers approve the electronic payments before they come from our accounts? she asked. They have the ability to send us overdraft notices.

When a consumers uses a debit or credit card, they almost always either enter their signature or provide a PIN. However, a merchant may enter a transaction on a consumer's account without either one. They just need the account number, name on the card and expiration date.

What Sherry would like to see is a requirement that consumers actively approve any transaction entered without a signature or PIN. And she's probably correct that the technology exists to do it.

In fact, Visa last year began a pilot project with eight large North American banks to to test the delivery of real-time notification alerts on Visa accounts.

The program was designed to help consumers by alerting cardholders in real-time or near real-time of transaction activity on their Visa account -- typically within seconds rather than hours or days. Participants received notification alerts from Visa through email or Short Message Service (SMS) delivered directly to their mobile devices.

While such a system is not the authorization check that Sherry is requesting, it's the next best thing. Through the alert received via email or SMS text, Visa says cardholders can verify the transaction details, and if the transaction appears to be irregular, can immediately contact their bank to help stop further transactions on the card.

The service is designed to help cardholders keep closer track of their transactions and spending levels as they go about their daily routine. According to a recent Javelin Strategy & Research report, consumers also view timely alerts as a valuable resource to help detect fraud.

"Information is power, especially when delivered in a timely manner," said Elizabeth Buse, Global Head of Product at Visa Inc. "Visa already delivers real-time transaction risk scores to financial institutions, and we are now empowering cardholders in this pilot with real-time transaction alerts.Participating Visa cardholders can typically receive alerts before they walk out of the store, rather than hours or even days later."

Visa made the system available on mobile devices powered by Android, the Open Handset Alliance's open source platform for mobile devices, including the T-Mobile G1 phone, at the end of last year. No word on when the system might be expanded.