Operational response strategies to payment card fraud by Commercial Banks in Kenya

Abstract

The purpose of this study was to determine the operational response strategies to payment card fraud by commercial banks in Kenya. The objectives were two fold, namely: to determine the operational response strategies used by commercial banks to address the payment card fraud challenge; and to determine the effectiveness of the operational response strategies in addressing the payment card fraud challenge. The study clearly identifies the various types of payment card fraud and the impact payment card fraud has on financial institutions and their customers. The literature review identifies the key operational response strategies to payment card fraud by commercial banks and the measures employed to determine their effectiveness The study employed a census study of all the members of KCDCA. This was found suitable since member banks of KCDCA issue cards that are accepted worldwide and are key stakeholders in employing strategies to address the payment card fraud challenge. Data analysis was conducted using descriptive statistics and correlation analysis The study concludes that a mix of operational strategies have been employed by commercial banks to; minimize payment card fraud, protect cardholder data, monitor and respond to compromise events as they occur. Enabling strong authentication; issuing chip and pin cards; sending transaction alerts; complying to PCIDSS; using fraud prevention and detection systems are some of the operational response strategies used by commercial banks in Kenya to address the payment card fraud challenge. The strategies are applied in varying degrees, explaining why only a few banks in Kenya issue chip cards or have real time fraud management solutions as at October, 2013.