How AI is tackling payments fraud

How has the pay­ments sys­tem evolved since the start of the pan­dem­ic?

JK: The pan­dem­ic accel­er­at­ed the growth of online pay­ments. We have seen a pro­fu­sion of busi­ness­es set­ting up their first ever ecom­merce or dig­i­tal oper­a­tions. The issue is that mer­chants are in the dark about these new online cus­tomers. They don’t know who the per­son is behind the com­put­er, and they don’t know what their intent is. If some­one buys 10 iPads in one go, are they a busi­ness, an indi­vid­ual with a lot of tech-obsessed kids or a fraud­ster? If they came into your store reg­u­lar­ly, you would talk to them and devel­op a rela­tion­ship. So, with­out that, we need to devel­op action­able dig­i­tal rela­tion­ships instead.

AS: Cus­tomers who pre­vi­ous­ly went into a store have now adapt­ed to sit­ting at home using their smart­phones to buy goods and ser­vices with cred­it cards, cryp­to or buy now pay lat­er ser­vices. This growth has meant more dig­i­tal and con­tact­less pay­ments, as well as QR codes and PayLinks. We are also see­ing more touch­less pay­ments, in par­tic­u­lar restau­rants and leisure facil­i­ties ditch­ing chip and pin machines and mov­ing to mobile tech­nolo­gies such as apps.

What are the main chal­lenges result­ing from this growth?

JK: It has put a sig­nif­i­cant­ly greater onus on ensur­ing secure dig­i­tal pay­ments. As trans­ac­tion num­bers have increased, so has the amount of fraud, with peo­ple using stolen cards, details they have secured from the black mar­ket or tak­ing over loy­al­ty accounts and bank­ing the reward points.
We’re also see­ing more charge­back fraud, mis­lead­ing­ly known as “friend­ly fraud”. At the end of the month, if you look at your cred­it card bill and see a pay­ment that you don’t recog­nise, you query the trans­ac­tion and ask for a charge­back. It could be that you’ve for­got­ten but peo­ple also use this to make fraud­u­lent refund claims.

AS: Mer­chants are also increas­ing­ly under pres­sure to pro­duce fric­tion­less cus­tomer pay­ment jour­neys to com­pete against the likes of Ama­zon. We have all been frus­trat­ed putting in card details and then see­ing the pay­ment screen whirring, only to be met with a decline mes­sage. Nei­ther gen­uine cus­tomers nor hon­est mer­chants want these “false neg­a­tives” query­ing and even con­demn­ing their iden­ti­ty.

How is arti­fi­cial intel­li­gence (AI) tech­nol­o­gy help­ing to pre­vent fraud and devel­op dig­i­tal iden­ti­ties?

JK: Using our tech­nol­o­gy, we har­vest con­sen­su­al cus­tomer data. Any­where that cus­tomers dig­i­tal­ly inter­act with a busi­ness, through a mobile app or web­site, feeds our machine learn­ing and behav­iour­al ana­lyt­ics tech­nol­o­gy to pro­file their dig­i­tal iden­ti­ty. We com­bine our data with that of our par­ent com­pa­ny, Equifax, to per­form a real-time analy­sis as to whether the cus­tomer try­ing to make an online trans­ac­tion is a good actor. We also do real-time post-autho­ri­sa­tion checks to counter charge­back fraud. These fric­tion­less process­es are equal­ly effec­tive online; card­hold­er present; cryp­to-based; cross-juris­dic­tion­al; or local pay­ment vari­ants.

Our AI fraud mit­i­ga­tion is a unique trans­ac­tion dead end for the 1% of fraud­sters who prey on gen­uine traders, and a major stride for­ward for hon­est trade.

What ben­e­fits have you seen from the Kount and Card­stream part­ner­ship?

AS: Cardstream’s Open Pay­ment Net­work is a unique con­stel­la­tion of diverse mer­chant ser­vice providers and ancil­lary pay­ment meth­ods. Fraud mit­i­ga­tion is a top pri­or­i­ty for our chan­nel part­ners and their mer­chant clients. Fraud­sters will always exist but adding the Kount tech­nol­o­gy has pro­vid­ed a mas­sive bar­ri­er against that threat. AI and machine learn­ing has been piv­otal in help­ing our part­ners to mit­i­gate fraud end to end with­out frus­trat­ing holdups – known as check­out fric­tion. Real-time deci­sions on a transaction’s pro­bity are being made in mil­lisec­onds.

Where do you see the pay­ments sec­tor mov­ing in the fore­see­able future?

JK: There will be more of a blend between pay­ments and dig­i­tal iden­ti­ty. Mer­chants will want to find more ways to help cus­tomers pay quick­ly and with less fric­tion. That will be helped by know­ing more about the cus­tomer and cre­at­ing a per­son­alised expe­ri­ence. If I am a keen fly fish­er­man and vis­it a sports web­site, I don’t want to see pages of prod­ucts for deep sea fish­ing. If I can be direct­ed straight away to prod­ucts that I need, then I will pay more quick­ly, and the mer­chants will do more busi­ness.

To learn more, vis­it kount.com and cardstream.com

Pro­mot­ed by Kount