Kredi kartları riskleri ve güvenlik önlemlerinin sigortacılık açısından incelenmesi

Abstract

T.C. MARMARA UNIVERSITY BANKING AND INSURANCE INSTITUTION INSURANCE DEPARTMENT RESEARCH ON THE RISKS OF CREDIT CARDS AND SECURITY IMPLEMENTATIONS IN THE VD2W OF INSURANCE (MASTER THESIS) SUPERVISOR DOÇ.DR. ÖMÜR BABAO?LU PREPARED BY AYŞEGÜL BÖLÜKBAŞI T.C. YÜKSEKfcTÎM KlMLf ISTANBUL, 1995CONTENTS 1. INTRODUCTION Page 2. RISK, CREDIT AND INSURANCE 2 2.1. THE CONCEPT OF RISK 2 2.1.1. Definitions of Risk 2 2.1.2. Risk Management in Insurance 2 2.2. THE CONCEPT OF CREDIT 3 2.2.1. Types of Credit 3 2.2.2. Credit Worthiness 3 2.2.3. Risk in Credit Analysis 4 2.3. INSURANCE AS A RISK MANAGEMENT TOOL 4 2.3.1. Life Insurance 4 2.3.2. Liability Insurance 5 2.3.3. Property Insurance 5 2.3.4 Transport Insurance 5 2.3.5. Credit and Suretyship Insurance 6 3. CREDIT CARDS 3.1. DEFINITIONS OF CREDIT CARDS 6 3.2. RELATION BETWEEN CREDIT AND CREDIT CARDS.. 6 3.3. HISTORY OF CREDIT CARDS 7 3.4. DEVELOPMENT OF CREDIT CARDS IN OTHER COUNTRIES AND TURKEY 8 3.4.1. Credit Cards in U.S.A 8 3.4.2. Credit Cards in German 8 3.4.3. Credit Cards in Switzerland 8 3.4.4. Credit Cards in Sweden 9 3.4.5. Credit Cards in France 9 3.4.6. Credit Cards in Turkey 9 3.5. USE OF CREDIT CARDS IN EUROPEAN COUNTRIERS 123.6. OPERATIONS OF CREDIT CARDS 12 3.7. BENEFITS OF CREDIT CARDS 12 3.7.1. Benefits of Credit Cards in the View of the Banks 12 3.7.2. Benefits of Cardholders 12 3.7.3. Benefits of Merchants 13 3.7.4. Benefits of Country 13 4. RISK OF CREDIT CARDS APPLICATION IN VIEW OF CREDIT CARDS ISSUERS 13 4.1. RISK OF CREDIT CARDS IN VIEW OF ISSUERS 14 4.2. FRAUD AND COUNTERFEIT IN THE APPLICATIONS OF CREDIT CARDS 14 4.2.1. Cardholder Applications 14 4.2.2. Card Distribution 14 4.2.3. Use of Cardholder Account Information 14 4.2.4. Use of Card by Righful Cardholder 15 4.3. CROSS BORDER FRAUD STATISTICS 15 4.4. COMBATING FRAUD AND FRAUD PREVANTATION 18 4.4.1. Fraud Preventation Programs in World 18 4.4.2. Fraud Preventation Programs in Turkey 19 4.5. COUNTERFEIT INSURANCE 20 4.5.1. Deductible ofMembers 21 4.5.2. Liability of Losses 21 4.5.2.1. Liability of Counterfeit Applications 21 4.5.2.2. Loss Preventation Program 225. CARDHOLDERS INSURANCE 22 5.1. ACCIDENT INSURANCE 22 5.1.1. Travel Accident Insurance 22 5.1.2. Injury Insurance 22 5.1.3. Delayed Flight 23 5.1.5. Eurocard International Assistance Program 23 5.1.5.1. General Conditions 23 5.1.5.2 Benefits of Eurocard International Assitance Program 24 5.1.5.3. Types of Benefit 24 5.2. INSURANCE OF LOST/STOLEN CARDS 25 6. CONCLUSION 27 -MÖSÎİ.e: 1. INTRODUCTION Parallel to the rapid growth of the banking sector in Turkey, banks have increased the quality and quantity of their customer services. In spite of the intensive competition related to payment card business, Turkish banks cooperation on the infrastructure of the system, improvements in retail banking and interest in payment cards resulted in a rapid development of the payment card business. In 1993, plastic cards have come to be used extensively as a result of the promotion and publicity activities of card issuers, extending both the scope and habit of using credit cards. This study constitute five major parts. In the introduction; the aim, importance of the subject, and the plan of the thesis are introduced. In second part; the basic concepts related with credit and risk are introduced. In the third part; definition of the credit card, history of the credit card, benefits are introduced. In the fourth part; the risk of the credit card, necessesily of the insurance, counterfeit activities and combating fraud are introduced. In the fifth part; cardholders insurance are introduced.'?-4 2. RJSK, CREDIT AND INSURANCE 2.1. THE CONCEPT OF RISK 2.1.1. Defitions of Risk Risk is the uncertainty as to the occurence of an economic loss and is the possiblility of an unfortunate occurance. Risk is at the very centre of insurance and for the insurance company, then, the risk is that its prediction will not be occurate. 2.1.2. Risk Management in Insurance The existence of risk is a source of discomfort to most people and the uncertainty which accompanies risk is a cause of anxiety and worry. Basicaly, people deal with risk in five ways. Risk is avoided, assumed, transferred, shared and reduced. Risk is avoided when the individual refuses to accept the risk even for instant Risk assumption is perhaps the most common method of dealing with risk. Risk may be transferred from one individual to another who is more willing to bear the risk. The distribution of risk is accomplished in a number of ways in our society.2.2. THE CONCEPT OF CREDIT An account receivable is created when credit is granted. These receivables include credit granted to other firms called trade credit and credit granted consumers called consumer credit. When granting credit a firm tries to distinguish between customers that will pay and customers that will not pay. 2.2.1. Types of Credit i. İn the view of quality ii. In the view of term iii. İn the view of guarantee iv. İn the view of warrant v. İn the view of source vi. İn the view of sector 2.2.2. Credit Worthiness Many firms use the traditional and subjective guidelines referred to as the five C's of credit. - Character; the customer's willingness to meet credit obligations. - Capacity; the customer's ability to meet credit obligations out of operating cash flows. - Capital; the customer's financial reserves- Collateral; a pledged asset in the case of default. - Conditions; general economic conditions. Conversely, firms such as credit card issuers have developed elaborate statistical models for determining the probability of default. 2.2.3. Risk in Credit Analysis Credit policy defines the institution's procedures for obtaining credit applicants, analyzing applications, deciding whether or not to grant credit and collecting payments. Granting credit is intrinsically risky. The possibility of borrowers failing to repay loan principal and interest is called defoult risk. 2.3. INSURANCE AS A RISK MANAGMENET TOOL From an individual point of view, insurance is an economic device whereby the individual substitutes a small certain cost (the premium) for a large uncertain financial loss which would exist if it were not for the insurance contract. The primary function Öf insurance is the creation of the counterpart of risk which is security. 2.3.1. Life Insurance The provision of life assurance is a quite different process from the provision of non-life insurance. The main distinction is that in life assurance the event being assured is certain to happen in the case of those policies paying ondeath, or is scientifically calculable in the event of policies not paying a benefit on death. 2.3.2. Liability Insurance Members of the public may suffer injury or damage to their property due to the activities of someone else, and the public liability insurances have been designed to provide compensation for those who may have to pay damages and legal costs for such injuries or for the damage to property. 2.3.3. Property Insurance In most commercial policies the insured will require cover for buildings, machinery and plan and stock. These are the three main headings under which property is insured depending upon the size of the insured company. 2.3.4. Transport Insurance The risks against which these items are collectively termed, perils of the sea and include fire, theft, collision and a wide range of other perils. - Marine insurance ~aa«* : - Voyage policy, floating policy - Avaition insurance2.3.5. Credit and Suretyship Insurance Traders can sustain heavy losses by reason of insolvency or protracted default on the part of buyers of their goods, and credit insurance can afford the requisite protection. In overseas trade it may be impossible for customers to pay for goods because of the outbreak of war or government restrictions on remittences, and this so-called political risk can be covered with the ordinary insolvency risk with the Export Credits Guarantee Department. No private insurer could bear so heary a risk; it is one essentialy for a government department, 3. CREDIT CARDS 3.1. DEFINITIONS OF CREDIT CARDS Credit cards are pieces of plastic issured to consumers by their bank or retail shop which allow payment for goods or services or guaranteeing the honouring of cheques issued. Additionally, they may be a method of obtaining cash. Some confusion has arisen because the names applied to the various types of cards donot always relate to their function. 3.2. RELATION BETWEEN CREDIT AND CREDIT CARDS There are three distinct schemes by which credit cards can offer the customer a means of obtaining credit.Firstly, there is the montly charge card where the cardholder purchases goods and/or services by offering the merchant payment through the charge card. Secondly, the option card where there are flexible monthly repayments subject to a minumum amount. Thirdly, the budget card where the customer has to make a fixed monthly payment: many store cards sperate in this way. 3.3. HISTORY OF THE CREDIT CARDS The first credit card was issued in 1914. General Petroleum Corporation of California (now mobil Oil) supplied cards to employees and selected customers. In 1950, Diners' Club was incorparated. it was the brainchild of two business associates, Frans McNamara and Ralph Schneider, who come to the end of a restaurant meal with friends and discovered they did not have cash to pay the bill. It was therefore arranged for their friends and business colleagues to pay their hotel and restraurant accounts in New York on a mothly account basis on production of the Diners' Club Card.3.4. DEVELOPMENT OF CREDIT CARDS IN OTHER COUNTRIES AND TURKEY 3.4.1. Credit Cards in U.S.A. The American Express Company introduced the American Express card in 1958 as a 'Tand 'E' card, an immediate need arase for USA cardholders travelling a broad in Europe on business and holidays to use their cards. In 1974, a separate international organization. IBANCO, was formed. The terms of the contract included the name 'Bank Americard' reverting to the Bank of America in 1979. 3.4.2. Credit Cards in Germany Some of the banks issue Eurocard and American Express and Diners' Club have both achieved a limited market share. Visa cards are promoted by Bank of America who have an agreement with BMW. 3.4.3. Credit Cards in Switzerland Some of the banks issue Eurocard and American Express and Diners Club in Switzerland. All of them have both achieved a limited market share.3.4.4. Credit Cards in Sweden Sweden has perhaps the most highly developed credit card system in Europe. There ara over 100 difficult credit cards in Sweden and they are almost universally accepted. 3.4.5. Credit Cards in France The development of credit cards began in 1967 when the main banks joined together to issue Carte Blue initially for internal use. In 1973 Carte Blue linked with Visa. Together with Carte Blue, they dominate the credit card market, although Diners'Club cards are extensively used in France. 3.4.6. Credit Cards in Turkey The history of credit cards in Turkey started in 1969 when Diners' Club of Turkey was established in Istanbul as a representatitve of Diners' Club on American Credit Card consortium. - American Express; In recent years, the New York based American Express Corporation has been transformed and in the autumn of 1982 it shares were added to the Daw Jones Industrial Average to become the only non-industrial financial services group. The American Express Card is a charge card and in 1982 Lloyds Bank joined with American Express to issue the American Express Gold card.10 - Diners' Club; is the first credit card of Turkey. Diners' Club card holder can repay the whole amount at the end of the month without charge provided no cash advance has been taken. - Visa; the word 'VISA' was selected because of its universal acceptance and understanding and in 1977 NBI and became VÎSA. In 1979 Interbank announced a change of name and card design. By 1983, the change from Mastercharge to Mastercard was completed. From its inception National Bank Americard prohibited members from participating in any other national card system. This was tested in the courts by the Worthan Bank in Little Rock, Arkansas in a legal battle lasting six years. Initially duality confused bank customers particularly as it coincided with the change from Bank Americard to Visa, but it soon became accepted for Mastercard and Visa to be seen together world wide. Cards are integral to retail banking: the challenge facing the banks is to meet customer needs and maximise profits by carefully balancing utility against risk. While Visa International's products are all extremely flexible, they fall into two basic categories. - Those that can be used at any merchant accepting VISA - Those that can only be used in the more controlled environments of electronic point-of-sale and or ATMs.11 - Eurocard/Mastercard; Mastercard International is recognised world leader in the international payment business. Europay International and Mastercard International forged a strategic partnership that orginated with the Eurocard International organisation in 1968. Europay is the sole licensor of Mastercard brands in Europe. Cirrus System Inc; is a wholly owned subsidiory Mastercard International. A recent agreement between Europay and Cirrus gives Europay full control of the Iicesing of the cirrus ATM brand in Europe. The global Mastercard / Cirrus ATM Network is rapidly expanding with 184.000 ATMs in 64 countries and territories projected by year end 1994. Maestro International; is a 50/50 joint venture between Europay International and Mastercard International. The Maestro band (edc/Maestro for Europe) is the world's first truly global 100 % on-line electronic point for sale debit payment service. Gold card; the prestigious Gold Card has been developed for Individuals whose offluent lifestyles require comfortable spending lines, which are often not pre set together with added security, convience and higher levels of support services whilst travellling. A credit line is optional some issuers. A gold business card is available for business executives who desire peer recognition of achievement and whose lifestyles reflect the need for heavy travel and entertainment expenditure. The gold car programme is an example of a successful product developed to satisfy a clearly defined need.12 Europay International S. A. was created on 1 st September 1992, following the merger of Eurocard International S.A, Eurocheque International S.C. and Eurocheque International Holdings S.A. Europay has unique business partnership with Mastercard International, a world leader in payment ship. 3.7. BENEFITS OF CREDIT CARDS 3.7.1. Benefits Of Credit Cards In The View Of The Banks By providing credit to the customers who wish to take advantage of benefits of the credit cards as a payment tool the banks have the chance of having these card holders as their customers collect their savings and render other services in their own nature. As a modern payment tool the credit cards processes render the banks on important prestige and advertisement possibility. 3.7.2. Benefits of Cardholders In compansion to payment by cash and checks than credit card is a very simple and easy payment tool for its holder. It has a much smaller risk than carrying money and checks. If the credit card is an international all, its holder during business and card is an international all, its holder during business and private travelling purposes can meet certain un expected expenditures.13 3.7.3. Benefits of Merchants By accepting the credit card, the merchant has the opportunity payment guarantee by the bank and also does not have the risk of having too much money in the cash-register. 3.7.4. Benefits of Country In view of the benefits provided to the card holder and the merchants the commercial activities of the country increase. In this way, more foreign currency is provided in the country also. 4. RISK OF CREDIT CARDS APPLICATIONS IN VIEW OF CREDITCARDS ISSUERS 4.1. RISK OF CREDIT CARDS IN VIEW OF ISSUERS Bad debts, particularly those attributable to fraud have escalated enormously in recent years. There is therefore a sufficient loss to cause the card operators to consider employing radical anti-abuse systems and although it is unlikely that the card companies will ever be able to eliminate such losses entirely it is certainly possible that the figure could be halved or better as a result of concentrating effort in this area. Seven categories of fraud are defined. i) Lost card14 ii) Stolen card iii) Card not received iv) Fraudelent application v) Counterfeit vi) Miscellaneous/non-defined vii) Fraudelent use of account number 4.2. FRAUD AND COUNTERFEIT IN THE APPLICATIONS OF CREDIT CARDS 4.2.1. Cardholder Application A person has stolen personal and financial information from his friend's wallet. He then uses this information to complete card application form but substituting his own address for delivary of the card. The bank send him a card. He then uses the card extensively but doesn't pay the bill. 4.2.2. Card Distribution Mr A works at a post office and he is responsible for sorting mail into the various postal addresses for delivery. He then sells the cards to a local contact who signs them and uses them for several weeks. These cards are not signed by the rightful cardholders, the fraudster can sign and use them. 4.3.3. Use of Cardholder Account Information Mrs A works in the credit card department. She steals account information about real cardholder from computer files and sells this on to a counterfeiter.15 The fraud only becomes known when the geniue cardholder complains that transactions she has not made are appearing on her statement. 4.4.4. Use of Card by Rightful Cardholder Mr A reports, falsely, to his credit card centre that his card has been stolen. He then continues to use his credit card for transactions. When he receives his credit card statement showing these transactions, he disputes them saying he did not make them because his card had been stolen. The bank can not prove that he made these transactions. 4.3. CROSS BORDER FRAUD STATISTICS The amount of loss due to fraudulent activity has been increasing. By 1990 over US $ 400 million was lost through fraudelent activity. The total Eurocard/Mastercard Cross Fraud Losses are USD 301.251.000 an increase more than 99 % over 1989 losses. Also there are three types of counterfeit, usually encountered. i) Manufactured cards; Totally counterfeit cards design, logo, hologram, signature, panel. ii) Altered cards; Genuine cards which were lost or stoles or stolen then altered, re-embossed and/or re-encoded.16 iii) White plastic; Embossed and/or encoded plain plastic cards with no design or logo used in cooperation with collusive merchants. To undertake this fraud, criminals obtain valid account data from imprinted sales slip of genuine transactions at merchant locations. Genuine cards are then altered by re-embossing and re-encoding the fraudelently obtained data. The vast majority of this type of fraud is carried out in the South East Asia Region where it began with losses being borne by Issuers throughout the world. The organized criminal activities of Chinese groups based and operating in Hong-Kong are largely responsible for the counterfeit fraud activities, throughout the South East Asia area in countries like Thailand, Malaysia, Signapore,Korea and Japon. Worldwide fraud activity by type: * Counterfeit; Counterfeit fraud is increased between 1992 and 1993. And is the number one fraud category accounting for almost 30 % of worldwide losses. * Stolen and lost card; The stolen and lost card fraud decreased at rates of 12% and 22% * Never-received issue; The never received issue fraud decreased 25,3 % between 1992-1993.17 * Mail order/telephone order; The fraud decreased 10,8 % between 1992 and 1993 mail order and telephone order. * Other; The other fraud category decreased 19,3 %, between 1992 and 1993. * Fraudulent application; Despite the increase, the fraudulent application category represents only 3,2 % of worldwide fraud. * Multiple imprints; Multiple imprints fraud increased 23 %. Worldwide fraud activity by region * Asia-Pasific Region; Total fraud in the Asia/Pasific region increased 50.9%. * Canada Region; As a result compared 1992 figures total fraud, counterfeit increased 46,4 %, 58,2 % respectively. * Europe Region; Fraud in the Europe region decreased 8,8 % between 1992 and 1993. * Latin America Region; Counterfeit which is the largest segment of fraud in this region increased by 1 16,1 % * Middle East/Africa Region; Total fraud in the Middle East/Africa region decreased 14,7 %.18 * United States Region; Total fraud in this region increased by only '.. / %. 4.4. COMBATING FRAUD AND FRAUD PRESENTATION Indeed, since 1990, fraud has been growing faster than payment care J *tt'cs valume. Most recently worldwide issuer sales valume incerased 16,6 percent <>vl*' the 12 months to March 1992, while the net value changed off to fraud grew «f lust over 49 percent during over the same period. 4.4.1. Fraud Preventation Programs in the World Fraud is a serious problem because it hurts everybody, members, merchands and cardholders alike. But fraud is not confined by national boun^r`cs Infact, more card crime affects cards used but side the country of issue than »H~«le of the losses an Belgion cards, for example, 60 percent occur outside Belgii`` Counterfeiting has been particularly strong in France, while there arr exceptionally high numbers of thefts of cards from the mail in the UK. Counterfeiting has also become a serious problem, moving 13 percent i«» nearly 18,5 percent of reported fraud and costing some $ 35 million to mem''' '?' over the same 91/92 period. To do this a five-pronged approach has been adopted: - Developing technology within the payment system19 - Ensuring that each member has a core level of risk management and security service. - Providing rapid, high quality fraud control data - Providing investigative coordination to members and law enforcement agencies -Providing training Objective; to reduce the risk of successful fraud against the Visa and EC/MC network. Key initiatives include: - Risk Identification Service - The Terminal Placement Programme - Transaction Analysis Screening - Fraud Information Service - National Merchant Alert Service 4.4.2. Fraud Preventation Program in Turkey Objective; to reduce the risk of fraudelent activities in Turkey. There have been some significant recent developments. The first has been the development of regional or country hot spots where fraud has risen beyond on acceptable level. The second has been an evolution observed in the last five years of criminal activity from individuals to some what organized crime. The third is the increasing share of conterfeit cards to the over all fraud level.20 Fraud preventation programs; * Risk management programs * To audit the merchant behaviour * Positive cardholder authorization service * Counterfeit insurance * Fraud reparting system * Card security 4.5. COUNTERFEIT INSURANCE Insurance Coverage Financial liability: issuer Excepted if no issuer can be identified -> acquirer Mastercard Insurance doesnit cover transactions which could have been charged back such as: - The issuer didnot receive sales slip from the acquirer - The transaction exceeds the floor limit and has not been authorized - The account number was on the Warning Bulletin - The card was no longer valid at the time of the transaction - Sales slip without imprint - Multiple drafts. 4.5.1. Deductible of Members Counterfeit Insurance (until June 30)21 - Up to three times the fixed deductible - Claims in excess of this amount: 75 % - Maximum $ 7.500 per account. Fixed Deductible The fixed deductible depends on the number of cards issued Number of Accounts Present Deductible upto 50.000 $ 10.000 50.001 - 100.000 $15,000 100.001 - 250.000 $30,000 250.001 - 500.000 $ 50.000 500.000 - 1.000.000 $75,000 1.000.000 -2.000.000 $100,000 4.5.2. Liability for Losses 4.5.2.1. Liability of Counterfeit Applications Mastercard will be responsible for 75 % of eligible losses, before application of appropriate member deductible. Member will be responsible for 25 % of all eligible losses. Maximum MCI collective liability: $ 15 million. If worlwide claim > $ 15 million reduction of the individual members net claim reimbursement by the ratio that worlwide claim exceed the $ 15 million maximum payment provision.'--i 22 Ratio = (worldwide claim - $ 1 5 million) / $ 1 5 million 4.5.2.2. Loss Preventation Program If the total net premiums collected and adjusted for operations expenses and reserves do not cover the total reimbursement required, Visa or Mastercard will prorated the reimbursement for all Insured Members that qualify. The prorated reimbursement is calculated as: Total Net Premiums Collected divided by Total Reimbursements Before Proration. Total unreimbursed Counterfeit Losses incurred by an acquirer must not exceed $ 3 per $ 1.000 of annual Merchant volume. 5. CARDHOLDERS INSURANCE 5.1. Accident Insurance It is recessary to examine accident insurance in four ways. 5.1.1. Travel Accident Insurance The Eurocard/Mastercard holder during his/her vacation is under the insurance coverage. During the cardholders vacation one way or there and back23 vacation, bodily injury caused by accident, according to the policy if it is valid, depending on the insurance covarege, claims will be paid to the insured. 5.1.2. Injury Insurance Bodily injury caused solely and directly by violent, accidental, external and visible means, excluding illness or disease and occurring whilst the cardholder are travelling outside his/her country. Relative; wife and children (under 18 years) 5.1.3. Delayed Flight Insurance payment shall not be paid; impeachments in performing the assistance in case of strike, war, invasion, act for foreign enemies, hostilities (whether war be declared or not), civil war, rebellion, insurrection, terrorism or military or usurped power, riot and civil commotion. Cardholder can pay the transaction wth his/her credit card if the flight delay over the 4 hours. 5.1.5, Eurocard International Assistance Program 5.1.5.1. General Conditions Assistance program subject to the terms of the agreement, will provide all entitled cardholders with the benefits provided for in the basic Eurocard Assistance Master Policy.24 Eurocard will pay assistance program for the current year of reference a preium calculated by multiplying the aaplicable unit premium by the average number of Gold Cards for such year of reference. 5.1.5.2. Benefits Of The Eurocard Internationl Assistance Program The main object of this program being for Eurocard to make use of the services offered by the program for the benefit of the cardholder and undertake direct the administration and settlement of any claims related to the agreement. And Gesa Assistance under takes to make available to the beneficiary the services of its international organization consisting of its 24 hour-a-day alarm centre and its relevant worldwide network of offices and agents to be contacted by the beneficiary incase of problem. 5.1.5.3. Types of Benefit - Medical Information In an emergency situation assistance program will be provided the beneficiary with basic information such as: name of doctors, specialist, dentists. If need be, the transfer of the beneficiary to a more appropriate hospital according to the nature of the injuries or the illness.25 - Medical Transportation Should the beneficiary suffer accidental bodily injury or sudden illness assistance program will organize and payfor: the admission of the beneficiary into the nearest hospital and the repatriation to TURKEY when after local treatment the condition of the beneficiary will not prevent his repatriation to domicile as a regular passenger. - Legal Assistance Should the beneficiary be prosecuted for civil liability according to the civil code in force in the country further to accidental damage caused to a third party or involuntary violation or no respect of the laws and local settlements of administrative nature in a private life situation. 5.2. INSURANCE OF LOST/STOLEN CARDS Cardholders need to be educated in the importance of safe guading their cards and their account information. Very few cardholders unfortunately realise how valuable their cards are and a fraudster can cause so much damage with a stolen card. Cardholders should report a loss or stolen card immidiately to bankcard center. And not use a card that they have reported as lost or stolen and which has been recovered.26 The card recovery bulletin is a list of account numbers of cards which should be confiscated when presents to merchants. If possible, these cards should be confiscated when they are presented. -» The longer the delay in reporting the card is missing, the greater the exposure to fraud loss. Concerning lost and stolen cards, cardholder should report any loss as soon as possible. Also, isssuer should be block the stolen or lost card's account immediately on its own system.27 6. CONCLUSION The movement of people and trade has led in turn to strong demand for an efficient and cost-effective way to transfer relatively small sums of money across national borders. Existing money transfer systems are designed for higher value, low-valume transactions. Through Visa Net, consumers can send money to participating International Standard Organisation card accounts in Europe, the Middle East and Africa. These include 60 million Visa card accounts. In Turkey, addition to domestic clearing and warning systems to minimize risks and value losses of credit cards centers and legal and educational activities to fill out the gaps in the existing payment card system. In 1993, to increase service quality and security, the members invested heavily on POS terminals which are mainly used for authorization and data processing at points of sale. Rapid development of the payment card business, improvements in technology, competition on service levels and increase in cost of funds have brought forward the need for a national switch system m Turkey. A National Switch System would improve the efficiency of the national authorization process, reduce the potential for fraudulent practises and ensure that the entire Turkish payment card system operates in a controlled and consistend manner. Switch System, supports reciprocity for ATM and POS devices spread thoughout Turkey, switches credit card transactions acquired at Turkish banks for on-line/stand-in authorization, gateway connections to VISA NET and processing28 and settlement are carried out by the Switch System to report on the funds to be transferred between all respective card issuers for national debit card transfers. Recards of Combined Warning Bulletin are published and mailed to merchants periodically. In 1993 C.W.B was published twice a month and mailed to acquirer members merchants. Also, seminars and courses have been held in collaboration with Visa, Europay and B.K.M. Members needs about new brands and services, international applications and procedures, increasing profit and service levels are taken into.