Fraud always seeks the path of least resistance. In the world of payments, hackers look for vulnerable spots to exploit. The rise of artificial intelligence introduces yet another layer that criminals can manipulate and enhance their methods.
In a recent PaymentsJournal webinar, Juan Funes, Director of Fraud and Decisioning Products at Mastercard, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed best practices organizations can use to maintain effective fraud mitigation strategies and stay ahead of evolving threats.
The Multiplying Avenues of Fraud
With the proliferation of digital payment methods, both opportunities for convenience and avenues for fraud have exploded.
Taking into consideration the diverse ways you could use a single card in a day:
“Living in New York City, I can use the stored card in my digital wallet to tap and get on the subway; I can order lunch using a delivery app with my card on file; later in the day, I might use the same card to buy sneakers from a new online merchant by manually entering the card details. In the evening, I might go to a restaurant for dinner and pay using my physical card,” said Funes.
Such varied transaction scenarios create multiple points of vulnerability:
“I’m one of those people who loves payments, so I have wacky things like a payment ring that I wear when I’m going for a run so I can buy water because I don’t want to carry a wallet,” said Wester. “I have all of these things that I pay attention to. Most people don’t, and yet they still use all of these new modes of payment. It’s just unconscious, so most people don’t even think about the fact that they use information that’s stored in their phone.”
The Interconnected Digital World: A Playground for Criminals
As our world becomes more digital and interconnected, the threats multiply. Organizations must brace for attacks from diverse and distributed criminal networks.
Advanced technologies enable fraudsters to refine their strategies continuously. “At Anti-Fraud conferences, I’ve seen examples of fraudsters promoting their services via social media, bragging about the success of their exploits via encrypted messaging apps. It’s the commercialization of fraud.”Funes mentioned.
AI isn’t just for automating legitimate tasks; it is also accelerating the evolution of fraud. It enables criminals to streamline costly manual processes and rapidly process data for maximum advantage.
“The fraudsters are very smart. They go through the same processes that we do when evaluating a business case. They’re asking, ‘What are my costs? What are my benefits?’” Funes and Wester explained.
The Imperative of Communication and Shared Vigilance
Effective fraud prevention doesn’t exist in a vacuum; it necessitates robust industry-wide communication and vigilance:
“My team is constantly communicating across functions to understand what’s trending in their space,” Funes stated. “It’s not just about looking at metrics but understanding the intelligence behind them. We see trends shifting from location to location, region to region.”
This collective understanding allows organizations to tailor their defenses more precisely. If a particular fraud pattern is successfully thwarted in one region, the insights gained can be leveraged globally.
Putting the User First
Fraud prevention is fundamentally about balancing risk control with consumer convenience. Persistently advancing technology presents a dual-edged sword: while it offers robust new defenses, over-reliance can inadvertently create user friction.
Therefore, it’s crucial to strike the right balance. “If fraud prevention protocols significantly impact cardholders, they may switch to other products. Finding the right balance is essential for each organization and the industry as a whole,” emphasized Funes.
Looking Ahead
Given the global scale and complex fraud patterns that are difficult to detect in isolation, organizations must stay agile and informed as we forge ahead in this rapidly changing landscape. A comprehensive set of rules, combined with the latest technologies and industry collaboration, will be essential in combatting fraud on a global scale.
Mastercard, a leader in the industry, has been at the forefront of innovation, leveraging AI for over two decades. As the landscape continues to grow and evolve, the company remains committed to safeguarding the entire digital ecosystem through its AI-fraud solutions.
“With global perspectives and the ability to adapt learnings from one region to another, we can mitigate these threats more effectively. Efficiency, balance, and robust rule sets are the future of fraud prevention,” Funes concluded.
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