Mastercard has unveiled a range of AI-powered security solutions and forged industry partnerships with Verizon, NatWest, Entersekt and Global Anti-Scam Alliance in a mission to tackle the rise of scams and impersonation fraud.

By combining its identity, biometric, AI and open banking capabilities into the ‘Scam Protect’ suite of solutions, Mastercard hopes to safeguard consumers across a wide range of scams, from card-based and account-to-account payments to fraudulent account openings.

In 2023, people in the US lost $12.5billion to internet scams, while in the UK, fraudsters were responsible for nearly 1.4 million thefts during the first half of 2023 – the equivalent of one every 12 seconds.

“Scammers are exploiting new technologies, making their deception and impersonation scams increasingly difficult for consumers to recognise,” comments Chris Reid, EVP of identity solutions at Mastercard. “Building on our innovations in AI and key partnerships, we are supporting financial institutions with insights to better detect and prevent scams, while helping consumers learn how to spot them.

Industry collaborations

Mastercard has also teamed up with industry partners to tackle scams, mitigate their impact, and educate consumers.

Telcos

Leveraging Verizon’s network capabilities, which provide advanced data analytics and insights, along with research reports like the Verizon Data Breach Investigations Report (DBIR), Mastercard aims to address emerging cybersecurity threats.

Building upon their longstanding partnership, Mastercard and Verizon are working together to develop innovative solutions to protect consumers from scams across various channels. By integrating Mastercard’s identity insights with Verizon’s network technologies, these collaborative efforts aim to create advanced tools capable of more accurately identifying and blocking scammers.

“The security landscape is constantly evolving, as are scammers’ techniques, but one constant has been social engineering – using texts and phone calls to coerce people,” said Kyle Malady, CEO, Verizon Business. “Verizon and Mastercard share a commitment to helping protect consumers from security threats. By combining our expertise, we’re building solutions to identify and thwart scammers before they initiate contact.”

Financial institutions

NatWest has implemented Mastercard’s AI-powered Consumer Fraud Risk solution.

Nick Elliot, head of payment fraud, NatWest, commented: “As the sophistication of scams has progressed, so has our real-time monitoring and prevention of fraud. Together with Mastercard, we are using the power of AI to identify payments to fraudsters and stop them before money is lost. In combination with our programme of consumer education and guidance on precautions, we are enhancing the safeguards for all our customers.”

Mastercard has also teamed up with Entersekt, a global financial authentication company, to utilise Mastercard Identity in the fight against scams. Entersekt employs Mastercard’s behavioural biometrics to enhance security for high-risk transactions, verifying sender biometrics to authenticate each transaction and protect senders from potential fraud before funds leave their bank account.

Consumer protection

Mastercard is a supporting member of the Global Anti-Scam Alliance, which protects consumers worldwide from scams through awareness campaigns. Together with the Global Anti-Scam Alliance, Mastercard will share knowledge and define joint actions to advocate for safe and secure ways to transact, interact and protect consumers.

As part of the Alliance, Mastercard recently helped establish the Global Anti-Scam Alliance chapter in Singapore, bringing together organisations in the region to collaborate on new solutions to protect consumers.

“We are pleased to welcome Mastercard to the Global Anti-Scam Alliance,” said Jorij Abraham, managing director, Global Anti-Scam Alliance. “Mastercard’s industry expertise and innovative technology will support our global network’s commitment to stopping scams and protecting consumers. We look forward to our continued collaboration in educating and empowering consumers worldwide.”

Form3, the cloud-native account-to-account platform, has launched a new authorised push payment fraud (APP fraud) prevention solution, powered by Feedzai, the anti-fraud and financial crime software provider.

The new product from Form3 and Feedzai is built using fully supervised machine learning, leveraging collaborative intelligence to understand the behaviour of both the payment sender and recipient, to determine the risk of the payment being made in real-time.

Form3’s new APP Fraud solution combines its account-to-account payment processing with Feedzai’s fraud and financial crime analytics, to create a model that identifies risk in both the individual sending the money and the person receiving the money. Understanding who is receiving the money is key to preventing fraud, as APP fraud involves impersonation that manipulates the victim into sending the money.

This new solution closes the gaps in intelligence that the fraudsters utilise to be able to use faster payments to target UK consumers and businesses. The solution’s model is then able to detect 95 per cent of fraud at market-standard false positive rates.

Mike Walters, CEO of Form3, commented: “The best way to tackle the rise of APP fraud is the use of collaborative intelligence and cutting-edge technologies that allow the real-time identification of scams within the payment message.

“By bringing together Form3’s payment processing expertise, and Feedzai’s fraud and financial crime solutions, we can tackle APP fraud so that UK banks can make faster payments safer. Feedzai is the solution provider of choice for two of the top four financial institutions in the UK, so we are partnering with a market leader to combat APP fraud.”

A £500million problem

Recognising that APP fraud losses account for nearly £500million per year, Form3 developed this new solution on the back of new regulation from the Payment Systems Regulator. This sees APP fraud victims given refunds by their bank from October 2024, with reimbursement now the responsibility of both the sending and the receiving institutions.

Pedro Barata, CPO at Feedzai, also added: “There is increasing regulation in this space, and rightly so – we’ve got to do everything in our power to protect the end consumer from APP fraud. With reimbursement becoming mandatory from October this year, it’s also in the interests of all banks to collectively ensure they prevent fraud and save huge payouts.

“By combining the expertise of Feedzai and Form3, we can drastically reduce the level of vulnerability in the payment process and give our customers the real-time intelligence that they need to stop fraudsters in their tracks.”

The partnership underscores Form3’s commitment to ‘doing well by doing good’, by employing technology to tackle the pervasive issue of fraud, which has profoundly impacted countless individuals worldwide.

The service will go live in April, with a full rollout in the UK market expected in the summer of 2024 – ahead of the implementation of the new rules in October 2024.

Visa has introduced three new AI-powered risk and fraud prevention solutions to enhance security in digital payments.

The new products, integrated into the end-to-end Visa Protect suite, aim to diminish fraud across immediate account-to-account and card not present (CNP) payments, as well as transactions both on and off Visa’s network.

Visa Protect is part of a broad suite of Visa value-added services, which has expanded to include nearly 200 products across five popular categories: acceptance, advisory, issuing, open banking, and protect.

Antony Cahill, global head of value-added services at Visa, said: “Digital payments go far beyond completing a sale – we are entering an era of modern commerce where winners move fast, AI is essential, experiences are flexible and security is native.

“Businesses are looking for partners that can enable their ambitions to compete and win and we’re proud to be the trusted partner helping a growing number of clients do exactly that in today’s highly competitive environment.”

Visa says security and fraud prevention are fundamental aspects of its operations.

Security and fraud prevention are fundamental to Visa. In 2023, Visa successfully thwarted $40billion in fraudulent activities, marking a significant increase from the preceding year.

Its new solutions include:

• Visa Deep Authorisation (VDA): This solution is tailored to help issuers mitigate the challenges they face due to the rising complexity of digital fraud. Utilising deep learning AI risk models and vast amounts of contextual data, VDA offers a new transaction risk scoring mechanism specifically optimised for card not present (CNP) payments.
• Expansion of Visa Advanced Authorisation (VAA) and Visa Risk Manager (VRM) for non-Visa card payments: Visa’s AI-driven fraud risk management solutions are now agnostic to network schemes. This expansion enables issuers to streamline their fraud detection operations, resulting in strengthened fraud protections and reduced operational costs.
• Real-time, account-to-account payment protection: a fraud prevention solution designed specifically for immediate payments, including peer-to-peer (P2P) digital wallets, account-to-account transactions, and central banks’ instant payment systems. Powered by advanced deep learning AI detection models, this service provides real-time risk scoring, empowering financial institutions to proactively block fraudulent transactions before they occur.

Each product will be available to clients starting in the first half of 2024, with varied launch dates by product and market.

“Real-time, digital payments are nearly ubiquitous, creating a need for security solutions that are transformative and adaptive to the real-world,” James Mirfin, SVP, global head of risk and identity solutions, Visa, also added: “As digital fraud grows in volume and sophistication, Visa is keeping pace by bolstering our powerful suite of risk and fraud solutions through our unmatched technology innovation and AI expertise, and expanding their utility beyond the Visa network.”

The fraud prevention industry is experiencing rapid growth in response to amplified regulatory pressure and increasingly sophisticated threats of online fraud.

Dorian Maillard, vice president at investment bank  DAI Magister, outlines the significant growth of the fraud prevention market due to the rise of digital payments, stressing the need for companies to enhance their strategies in response to evolving fraud risks and tighter regulations.

The meteoric rise of digital payments over the past decade has been a double-edged sword. It has revolutionised convenience for consumers and created new business opportunities, but it has also opened a Pandora’s box of fraud risks.

This growing threat landscape is set to significantly propel the growth of the fraud prevention market, which is predicted to more than double to $67billion by 2028.

Digital payments, encompassing everything from online shopping and mobile payments to e-commerce, have created a vast new playing field for fraudsters to exploit. These malicious scammers are growing in number and refining their strategies, employing ever more sophisticated methods, including account takeovers, synthetic identity fraud, and social engineering scams. In the UK alone, fraudsters syphoned off £1.2billion in 2022, with almost 80 per cent of app fraud cases starting online.

As the financial toll climbs, regulators worldwide are stepping up, implementing stricter security and compliance mandates to safeguard the digital payment ecosystem and enforce corporate accountability in fraud prevention. The UK’s recent Economic Crime and Transparency Act 2023, which includes a provision to make businesses liable if they fail to prevent staff or a connected third party from committing an economic crime, is one such example.

Amid this backdrop, where advanced fraud schemes meet tightening regulations, companies across industries have little choice but to elevate their fraud prevention strategies. Investing in advanced solutions that can navigate the evolving regulatory landscape and protect against increasingly sophisticated tactics has become more critical than ever.

Key benefits of digital fraud prevention tools

Real-time monitoring leveraging fraud detection algorithms

The power of modern fraud detection tools lies in their ability to monitor transactions and user behaviour continuously, in real time. By analysing vast datasets, these tools can spot anomalies that signal fraudulent activities, such as unusual spending patterns or suspicious login attempts, with greater accuracy and efficiency. This ensures enhanced protection against fraudulent activities while allowing legitimate transactions to flow smoothly without unnecessary interruptions or delays.

Scalability and customisation

As businesses grow, so does their need for scalable and customisable fraud prevention solutions. Cloud-native digital fraud prevention tools are particularly adept at meeting these needs, offering the flexibility to scale with a business’s growth and the adaptability to respond to evolving transaction volumes and fraud strategies. These tools also enable businesses to tailor their fraud prevention measures, allowing for the integration of industry-specific rules and parameters that align with their unique risk profiles.

Enhanced security and regulatory compliance

In sectors like finance, healthcare, and technology, stringent regulations govern the protection of sensitive information from unauthorised access or misuse. These regulations mandate comprehensive measures, including data encryption, secure storage, meticulous access control, and detailed reporting of security breaches or suspicious activities. Integrating digital fraud prevention tools that offer multi-layered security features, such as encryption, authentication, and robust access controls, allows organisations in heavily regulated sectors to meet these stringent security requirements more efficiently and effectively.

Improved customer retention and financials

Implementing strong fraud prevention measures demonstrates a business’s commitment to protecting its customers’ security, an essential aspect of building a trustworthy relationship. This commitment instils trust and fosters a deep sense of loyalty among customers. When customers feel secure and valued, they are more likely to continue using the services or products of a business, leading to increased customer retention. Over time, this loyalty translates into sustained revenue growth as satisfied customers make repeat purchases and are more likely to recommend a business to others, expanding the customer base and boosting revenue further.

AI-native technologies unlock new possibilities

Advanced fraud detection and prediction

AI-powered fraud detection utilises advanced algorithms to do more than analyse real-time transactions. These algorithms learn from historical trends and predict potential fraud risks before they even happen. This proactive approach offers a significant advantage over traditional methods, which often play catch-up with fraudsters’ ever-evolving tactics.

Multi-dimensional analysis

AI algorithms are powerful detectives in the fight against fraud. They can analyse diverse data sources, such as transaction history, device fingerprinting, geolocation data, and social media activity, to create a comprehensive risk assessment for every transaction.

Automation of operations

AI automates many aspects of fraud detection and prevention, significantly reducing the need for manual intervention and enabling organisations to efficiently process a higher volume of transactions.

A consolidated future for fraud prevention

The battle against fraud faces a double threat: smarter criminals and stricter regulations. Fraudsters are deploying ever-more sophisticated tactics, leading to billions in losses annually. Adding fuel to the fire are increasingly stringent regulations, especially for companies operating across borders. This creates a perfect storm – businesses need advanced technology to combat a growing array of fraud risks while navigating complex compliance requirements in multiple regions. The diverse and complicated nature of these challenges is increasing the demand for comprehensive fraud protection solutions incorporating advanced analytics, machine learning, and AI capabilities.

Consolidation allows fraud prevention providers to acquire the advanced technologies and expertise to offer more comprehensive and globally scalable solutions to meet these requirements. It also enables providers to cater to growing customer preferences for integrated, end-to-end solutions that provide a wide range of capabilities, from detection to prevention and mitigation.

Rapid technological advancements will also likely further propel this consolidation in the sector as developing effective in-house AI-native solutions is becoming increasingly complex and resource-intensive, especially for large incumbent players that have yet to fully embrace the technology and AI shift.

Cotribute, an embeddable fintech platform helping credit unions grow deposits, loans and memberships, has received the Access Provider Certification of Global Know Your Customer (GKYC) from FIS, the financial services technology leader.

The certification from FIS was awarded following the successful integration of the FIS GKYC module with the Cotribute digital loan application and account opening platform to provide community banks and credit unions with a modern, frictionless experience that expedites onboarding while controlling fraud.

The GKYC solution provides a real-time decisioning solution for identity verification and fraud detection designed to reduce friction during the customer onboarding process, while mitigating risks and ensuring compliance with regulatory requirements.

The modular decisioning solution is now seamlessly integrated with Cotribute’s digital account onboarding platform, providing community financial institutions robust rules for orchestrating and sequencing across many decisioning tools. This provides financial institutions with a more comprehensive view of each account holder’s identity profile while enabling a faster, frictionless onboarding experience.

The service simplifies due diligence processes for CIP and KYC/KYB workflows, and streamlines compliance with rules orchestration across IDV, Document ID, Fraud and Watchlist Screening. Global KYC also provides a single-pane transaction manager with reporting and a dashboard.

Philip Paul, CEO of Cotribute, said: “Financial institutions must balance providing a seamless user experience, while also ensuring compliance and preventing fraud.

“When customers encounter account opening delays, they may abandon the effort forever. Yet with escalating fraud and changing requirements, the tradeoff is often onboarding slowdowns.

“Integrating a proven Global KYC solution with our digital account opening platform will help banks and credit unions boost customer conversions and improve the account-opening experience with faster, frictionless customer onboarding, with the added benefit of advanced fraud detection and prevention tools.”

Mitigating fraud

Cotribute’s platform now includes a wide range of decisioning modules, including risk screening, identity verification, watchlist screening and fraud screening:

• Risk Screening: a demand deposit account (DDA) origination service comprising several components and databases including external public record data, external credit bureau attributes, and credit scores to determine behavioural risk.
• Identity Verification: a web-based solution that provides trusted business intelligence to help institutions make educated decisions faster, open more legitimate accounts and protect against identity fraud while supporting compliance with the PATRIOT Act.
• Watchlist Screening: automates and simplifies screening to help institutions satisfy the PATRIOT Act requirements of the Customer Information Program (CIP) during account origination or other areas such as check cashing transactions, check issuance and other financial services.
• Fraud Screening: leveraging data modelling methods, this service indicates suspected fraudulent activity, prompting the institution to investigate further. This module automatically examines data seeking out-of-pattern behaviour related to identities, crime dynamics, history mobility patterns, previous fraud activity and other indicators to create a score, key score drivers, flags and messages. These help institutions review and manage suspected fraudulent new accounts and account changes.

Institutions can now leverage the automated, real-time decisioning modules, customisable rules and workflows, as well as the advanced verification and detection tools to mitigate fraud. Banks and credit unions are now able to detect and prevent fraud while providing a simple, faster onboarding process designed to attract new consumer and business accounts and expand existing customer relationships.

Cryptocurrency exchange Binance is scaling its tools aiming to prevent unnecessary trading fees associated with unintentional self-trades.

Binance will fully roll out the self-transaction prevention (STP) function for all users of spot and margin trading on Oct. 26, the firm announced on its blog on Oct. 11.

Following the integration, the “expire maker” STP mode will be the default mode for all trading pairs and orders on Binance’s spot and margin trading platforms.

Once the STP feature is live, users will be able to check what orders have expired due to the STP function on the Binance official website, Binance App and Binance Desktop App through the transaction history page, the announcement notes.

Introduced in January 2023, Binance’s STP functionality is designed to block the execution of an order if it would result in a self-trade. The function targets application programming interface (API) traders, who set up specific programs to execute trades automatically with an exchange’s trading engine.

Self-trading occurs when an API user or a group of related users trade with themselves, intentionally or unintentionally. The STP enables API traders to avoid accidental self-trading transactions, helping users prevent unnecessary fees associated with such transactions.

Related: Decentralized exchanges a magnet for crypto wash traders: Solidus Labs

“Without STP, unintentional self-trading could happen in a competitive marketplace. For example, when orders from separate trading units of the same firm, using the same unique UID, with unrelated trading strategies, happen to post orders that trade with each other,” Binance said.

While unintentional self-trading transactions are handled through the STP, intentional self-trades are prohibited on the exchange. “When self-trading is done intentionally to create an illusion of trading activity, it can be considered a form of market manipulation,” Binance wrote, adding:

“Our market surveillance team actively monitors market activity to identify intentional self-trading and any other forms of market manipulation. Binance has extensive tools to track intentional self-trading and investigate offenders.”

As previously mentioned, Binance integrated the STP feature for USD-margined futures on API in August 2023. “The STP function is optional and only takes effect when users enable it,” Binance noted.

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