AI Is The Clear Answer To Fraud Prevention

May 04, 2020

AI has received a lot of notoriety as the ultimate solution for fraud prevention.

Artificial Intelligence or (AI) has been a topic of much discussion in recent years. Many merchants falsely believe that it’s the “new kid on the block” of payment fraud solutions. This could not be further from the truth. In fact, FICO has been steeped in this type of technology for the past 25+ years and is responsible for keeping billions of cards secure around the world.

Artificial intelligence’s strength lies in its ability to minimize false positives, minimize and avert fraud attempts, along with the option to scale these features with speed.

Additionally, artificial intelligence is able to decipher insights based on trends from supervised machine learning. New knowledge is also gained from “unsupervised machine learning algorithms”. All these sources are what is behind the reduction of payment fraud. Using both of these machine learning methods, AI can interpret whether a certain transaction or a sequence of financial activities is fraudulent or not. This will in turn alert fraud analysts instantly so they can take appropriate action.

Here Are Additional Reasons AI Is The Clear Answer To Fraud Prevention

  • Payment fraud is becoming more complicated. They have a distinct “digital footprint” or pattern, sequence, and structure, making them indiscernible if using “rule-based logic” and “predictive models” exclusively. With the growing sophistication of this type of fraud, AI is up to the task.
  • AI has both scale and speed to attack payment fraud. AI companies offering fraud solutions are out-doing each other when it comes to performing real-time analysis of transaction information, focusing heavily on research and development.
  • AI’s “predictive analytics” along with machine learning techniques are the optimal tools needed to find deviations in large-scale data sets, literally within seconds. If the machine learning model has a vast amount of data to work with, its predictive value becomes more precise. Machine learning algorithms learn what is authentic and what is a counterfeit transaction from an intelligence angle.

Jeff Sakasegawa, a trust and safety architect with Sift, addresses the confusion surrounding AI and ML and how both can be powerhouses for preventing fraud. He states: 

“There’s a lot of mental fatigue in the market regarding AI, or just varying messages on the technology which differs from company to company. This leads to incomplete or inaccurate perceptions which can be clarified in additional conversations.” 

Initially, setting up AI can be simple, if not easy. However, it will take a bit of time to experience the full benefits of AI as it needs time to learn and comprehend what signals to look out for in fraudulent behavior. And of course, it will greatly depend on whether your business sells moderately priced items, or high ticket items on a regular basis.

AI As A Clear Solution

Without a doubt, Artificial Intelligence is keeping pace with the growing advancement and sophistication of payment fraud. Coupled with Machine Learning, they are both crucial tools needed to diminish risk and loss of revenue.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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