"They have poured a lot of money into credit card fraud detection because fraud was so rampant back in the 80s," Litan said. "It was 10 to 15 times higher than it is now. The banks ate that fraud. So the only way they could afford to push out new cards was if they had better credit card detection systems."
It's a different story from the banking world where most of the systems there are set up to go after money laundering. The banks don't have their assets directly on the line.
With credit cards, Litan said, the systems set up a profile of each customer's spending habits. If you divert from that, an alert is then sent out.
If thieves steal a group of credit card numbers off a database somewhere and make fake copies, one of the first places they test them is at a gas station, Litan said. Once the card works, they will immediately go and make a big purchase elsewhere. So the computers automatically raise a question if a $10 gas station purchase is immediately followed by $20,000 at a jewelry store.
Other common alerts include somebody who has only used a credit card in Iowa for 15 years and now is using it in Ukraine, or somebody who has transactions in California and New York seconds apart.
"The technology is never the issue," Litan said. "There are lots of technologies to track every single thing everyone's doing. But most banks haven't spent the money on it."