Great idea, in theory. I used to use HSBC and got tired of telling them that I'd be traveling to a foreign country only to have them put a security hold on my account when I used my card in that country. One priceless conversation with a support droid went like this:
Me: Why is there a security hold on my account?
Droid: We noticed an attempt to use the card in Mexico.
Me: I called and notified the bank that I would be traveling in Mexico. Don't you record and track that information.
Droid: We certainly do. It would be right here in your customer.... Oh. I see it says you'll be traveling in Mexico.
Me: (heavy sigh)
Even the foreign country thing isn't a valid measure. HSBC put a security hold on my account because we used the card in Canada. They told me that I should have notified them that I would be traveling in Canada. (This was before the Mexico incident.) When I pointed out that the city I was in was right next door to us, but they had no problem with me using my card in Seattle which is quite a ways away, their response was that I was in a foreign country.
Needless to say we no longer use HSBC. HSBC was also the bank that put our account on hold for suspicious activity because we'd used it to buy something on the internet.
So the issue isn't whether the bank knows where you are, it's whether they can effectively utilize the information for the stated purpose. Some may be able to do so, but I'm willing to bet that for others the request comes from the marketing department instead of the fraud department.