If you have a debit card program, fraud may well be public enemy number one. Fraud can generate serious financial losses, create a rift between you and your members, and consume massive resources in every department from IT to member services. Unless you develop a proactive strategy that puts you in charge, fraud is going to set the depressing tone.

It doesn’t have to be this way. Although debit card fraud represents a growing portion of overall card fraud – according to Javelin Strategy and Research, debit card fraud comprised 36 percent of card fraud in 2010, up from 27 percent in 2009 – fraud detection and prevention techniques are constantly being improved. And with the right approach to member service, dealing with fraud can actually create an alliance between you and your members. Some points to consider:

You need real-time fraud detection. “Fraudsters are getting more sophisticated,” says Connie Trudgeon, Vice President, Operations, for CO-OP Financial Services. “Fraudulent transactions occur very quickly – often within minutes. Without a neural network and real-time detection, stopping fraud before real damage is done is nearly impossible.” In the current environment, it’s not a question of whether or not you’ll encounter fraud; it’s a question of when. Says Trudgeon: “You only need one or two occurrences of fraud and you’ve more than paid what it would have cost for a state-of-the-art program.”

Play the cards you’ve dealt. Real-time fraud detection represents one enhancement to your entire debit card program. With the announcement in June of the Federal Reserve Board’s rules on interchange, it’s also time to look for ways to increase penetration, usage and revenue. Caroline Lane and Jim Hanisch co-hosted a CO-OP webinar on a go-forward strategy in light of the new rules, which CO-OP member institutions can view and listen to by logging onto the secure Extranet here.

Take sides. Halting fraud is the best way to keep members happy. But when fraud occurs, having the right response can spell the difference between crisis and opportunity. “No one wants to find out their debit card has been exposed to fraudulent transactions,” says Trudgeon. “It’s a very uncomfortable situation for the cardholder, and you have to handle it well. There’s a way of presenting the information so that the member understands you’re on their side; you’re there to help fix the problem.” If your branch or call center staff doesn’t act effectively and with sincerity, you risk being the bearer of bad tidings – and, worse, somehow complicit in the loss. But handle it with compassion and skill, and you may win a customer for life.

“You have to think about where your touch points are today,” says Trudgeon. “As members are less and less likely to visit the branch, the interactions you have around fraud may become more and more representative of your relationship.”