With artificial intelligence gaining prominence as the next frontier in fraud detection, Visa has completed its acquisition of Featurespace, a developer of real-time AI-powered payment protection technology.
Featurespace works with many of the world’s largest banks and financial institutions, including HSBC, NatWest, Worldpay, and Danske Bank. The company processes more than 100 billion payment events each year.
This move mirrors a recent announcement from Mastercard, which earlier this year revealed plans to acquire Recorded Future, an AI company specializing in payments fraud. Recorded Future bills itself as a threat intelligence company with more than 1,900 clients across 75 countries. The deal will expand Mastercard’s existing suite of identity, fraud prevention, and cybersecurity services, primarily under the Brighterion label.
Both credit card giants recognize the importance of deploying AI as widely as possible. In addition to being one of the top buzzwords currently in the financial sector, the technology has already demonstrated its worth as an effective crime-fighting tool.
“There’s so much information that is collected by a financial institution or a merchant that could be used to help detect fraud or suspicious activity,” said Suzanne Sando, Senior Analyst of Fraud and Security at Javelin Strategy & Research. “This data might contain signs of irregularities in the way that transactions are being made, and that’s where AI comes in. There is a wealth of data that is not being used, and it needs to be used to create a more holistic view of the entire transaction.”
Buying the Expertise
It appears that both Visa and Mastercard opted to acquire an AI company rather than further developing these capabilities in-house. For example, Visa says that Featurespace’s capabilities complement its existing fraud prevention and risk scoring offerings.
Visa’s existing Cybersource service addresses fraud in e-commerce and retail. This solution also uses machine learning-based models for risk scoring, but primarily on the merchant side. Cybersource specializes in combatting payment transaction fraud, such as criminals using stolen credit card numbers on a merchant’s website.
Similarly, in 2017, Mastercard’s first major foray into AI came with the acquisition of Brighterion, which is now its primary fraud detection arm. Overall, these acquisitions make sense from a branding perspective. Not only does it allow an established company like Visa or Mastercard to bring proven, turnkey technologies into the fold, but it also sends a strong message to criminals and competitors alike that they are leveraging AI in a significant way.
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