Fico, the US analytics software company, has developed technology that correlates the ATM or point-of-sale where a debit or credit card is being used with the physical location of a user’s mobile phone to prevent fraud.

Based on the proximity of the registered device to the ATM or point-of-sale, the bank can choose to block or clear a transaction.

In UK trials, the technology reduced the instances of false positives, where genuine transactions are queried because they appear fraudulent, by up to 70 per cent, said Fico, which developed the system in partnership with Validsoft, a mobile security firm.

Several banks in the UK are now working on deploying the technology, it said.

Fraud is a common problem, with banks often taking the default position of blocking legitimate customers when they attempt to use an ATM abroad, which in turn becomes a major headache for travellers.

It is unclear if the system uses 3G, GPS or Wi-Fi or a combination to pinpoint the location of a user’s handset.

Possible flaws in the idea include users who swap SIMs in their phones, or even have a number of devices when travelling. Or those travellers who prefer not to incur data roaming charges and keep data turned off in a foreign country.