• Fri. Jul 19th, 2024

Payment Fraud Prevention Through Generative AI Tools


Traditional rules-based systems for detecting payments fraud are increasingly inadequate due to the complex schemes devised by fraudsters. This leads to high false positives and limited adaptability. Predictive artificial intelligence (AI) improves on this by reducing false positives and adapting to new schemes using machine learning. However, generative AI, employing unsupervised or semi-supervised learning techniques, excels at detecting subtle and novel fraud patterns in unstructured data. This significantly enhances fraud detection capabilities.83%: Share of financial institutions eyeing generative AI’s use for fighting fraud

Modern payments fraud demands real-time learning and adaptation at scale. Generative AI offers the unprecedented advantage of continuous learning. It rapidly refines and adapts its understanding of patterns to distinguish between legitimate and fraudulent payments more accurately. Additionally, generative AI can produce synthetic datasets that mimic real-world financial data. This allows for robust model training without compromising privacy or compliance.

Generative AI also improves consumer experiences by reducing false positives. Customers often feel frustrated when merchant checkouts incorrectly flag legitimate transactions. By distinguishing between genuine and fraudulent behaviors more accurately, generative AI ensures smoother transaction experiences and fewer customer frustrations.

The “Generative AI Tracker®” uncovers the innovative capabilities and emerging use cases of generative AI in transforming fraud fighting in the payments industry while looking at the privacy concerns, bias and regulatory hurdles that must be addressed for broader adoption.

Leading the Way in Generative AI for Payment Fraud Detection

300%: The increase in speed at which Mastercard’s generative AI solution can identify merchants at risk of or compromised by fraudstersGenerative AI’s rise has not gone unnoticed by the financial industry. Two industry stalwarts — Visa and Mastercard — have already built and deployed their own in-house generative AI payments fraud detection tools. While the industry’s use of the technology remains very much in its infancy, these companies provide a glimpse at the various ways to use generative AI to combat payments-related fraud — and early adopters already see tangible benefits.

To learn more, visit the Tracker’s Companies of Note section.

Generative AI Could Cut Through the Fraud Detection Noise

The potential of generative AI to reduce the costly headache of payments fraud has garnered considerable attention in the financial industry. As this technology continues to mature and its adoption gains traction, it could become a cornerstone of modern payments fraud prevention strategies, promising improvements in accuracy, efficiency and cost savings.

The excitement stems largely from the technology’s potential to overcome the inherent limitations of traditional fraud detection systems. Its capabilities hold the potential to supplement current methods with real-time identification and neutralization of payments fraud, a prospect with implications for further safeguarding the purchasing experience and improving the bottom line of financial institutions (FIs) and businesses.

To learn more, visit the Tracker’s Innovation and Use Cases section.85%: The reduction in false positives achieved by Visa’s generative AI tool that identifies and scores enumeration attacks in real time

The Tough Road to Overtake Payment Fraud

The breadth and impact of generative AI use cases help explain the financial industry’s excitement about it’s potential to fight fraud, with 83% of FIs already eyeing its use for these reasons. However, a sobering reality tempers this widespread enthusiasm: The same sophistication that makes this such a powerful tool against fraud also poses obstacles to its industrywide adoption.

To learn more, visit the Tracker’s Issues and Challenges section.

About the Tracker

The “Generative AI Tracker®” uncovers the innovative capabilities and emerging use cases of generative AI in transforming fraud fighting in the payments industry while looking at the privacy concerns, bias and regulatory hurdles that must be fixed for broader adoption.


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