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Alexander Hamilton Awards

Harnessing Analytics to Minimize Debit-Card Fraud

Congratulations to the U.S. Postal Service for winning the 2018 Gold Alexander Hamilton Award in Operational Risk Management & Insurance!

Since it began providing Civil War soldiers with a secure means of sending funds back home, the U.S. Postal Service (USPS) has been one of the nation’s largest providers of money orders. Now post offices from coast to coast sell more than 85 million money orders, having a face value of more than $20 billion, each year. They accept payment for these money orders via cash or debit card only.

Today USPS point-of-sale systems are EMV-enabled, and all debit-card payments for money orders must use chip technology. Three years ago, however, these capabilities were not live. In October 2015, credit and debit card issuers in the U.S. shifted liability for fraudulent transactions to any merchant that failed to meet EMV specifications. It was an effort to push retailers and other vendors to adopt the new, more secure technology. Unfortunately, at the time, the Postal Service was not yet EMV-ready.

“We can’t disclose the exact size of the risk we were facing, but any loss is too great a loss for us,” says Elizabeth M. Schafer, treasurer of the U.S. Postal Service. “We’re an entirely self-funding entity, paying for our operations out of the sale of products like money orders. When debit card issuers shifted liability to us, we couldn’t afford to start paying for a lot of fraud losses.”

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Meg Waters

Meg Waters

Meg Waters is the editor in chief of Treasury & Risk. She is the former editor in chief of BPM Magazine and the former managing editor of Business Finance.

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