A mobile technology provider has been piloting tests of its services with seven of the top 10 banks, Bank Innovation has learned.

Locaid began the test late last year.

“It takes a little time to get to market,” Carolyn Hodge, Locaid’s chief marketing officer, tells Bank Innovation. “We will have a major customer announcement coming out [in the next few months].”

Locaid, the location-as-a-service vendor, can learn a person’s whereabouts based on his phone number alone. The service it is testing is designed to use that capability to reduce banking transaction fraud. This is how it works, practically speaking: Say a consumer is handing over her card to a clerk to pay for a Rebecca Taylor dress. Before the transaction goes through, the cellphone is pinged as a way to help make sure she is who she says she is. In other words, if the card is with the cellphone, that transaction contains little fraud risk.

Plus, the technology doesn’t run off smartphone apps and is different from GPS, Hodge says. The technology was developed from the company making agreements with carriers, and in turn, aggregating the location data. To find devices, then, depends on the signal strength of nearby cell towers. Already, the vendor says it provides access to more than 350 million devices on any carrier and device in North America.

In reality, using its technology would just play one role in authentication, depending on the FI’s fraud algorithm. Perhaps it will not stop a transaction – but it could raise a red flag.

In piloting its services to date, one main question creeping up from interested parties concerns addressing consumer privacy issues. The answer: consumers must opt into the service. For financial institutions, Hodge argues that the pitch is pretty straight forward: sign up for this service because getting a cellphone pinged is better than a fraudulent charge.

The math works for banks, too.

The company argues that instead of a $25 phone call to validate a purchase, the bank can ascertain legitimacy through mobile location technology for pennies.

Location Labs is another company that competes in the space. We expect the market to become more crowded in the coming years, as digital wallets become mainstream in the United States. However, how vendors prevent fraudulent transactions with mobile technologies might have to change as cellphones replace physical cards — depending on where the card credentials reside.