Coinspeaker
Mastercard Implements AI Fraud Detection Tool in Nine UK Banks to Prevent APP Scams
American multinational financial services corporation Mastercard Inc (NYSE: MA) has created a new AI tool that helps detect fraudulent transactions and has shipped the tool off to a few banks.
Mastercard calls its AI tool the Consumer Fraud Risk system and has already installed it in nine UK banks in the UK. Some include Bank of Scotland Plc, Lloyds Banking Group Plc, and Natwest Group Plc.
According to a Bloomberg report, Mastercard trained its AI tool using years of transaction data. This training allows the tool to predict customer attempts to move funds that may be flagged for authorized push payment (APP) scams. These scams fraudulently convince a person to transfer money to an account feigning legitimacy. Fraudsters may create accounts and pretend they belong to a business, known friend, or family member.
According to Mastercard’s president of cyber and intelligence, many APP (authorized push payments) scams are difficult to tackle because they involve transfers legitimately completed by the account owners. Bhalla says Mastercard considers this a “huge problem” because since the transfers are legit, they pass security checks deployed to detect other fraudulent schemes like unauthorized payments.
How the Mastercard AI Tool Works
Mastercard’s AI tool scouts all attempted transfers by customers. The Consumer Fraud Risk system designates each attempt with a risk score from 0 to 999 in less than a second. Aided by its own analysis and the AI tool, a bank can block a potential transaction in time.
Mastercard created the tool using extensive work with banks. For five years, the payment processor has collaborated with banks to study how fraudsters move funds between banks. These scammers use this method to complicate or conceal fraudulent activity. Using this information, Mastercard noticed certain patterns and several accounts that may increase the risk of fraudulent behavior and used these data to train the AI tool.
The Bloomberg report states that TSB Banking Group Plc is the first institution to install the system. Since the implementation four months ago, the bank’s ability to detect this type of fraud has increased by 20%. TSB predicts that banks in the UK can save £100 million every year upon full industry adoption of Mastercard’s AI tool. According to the bank’s head of fraud Paul Davis, “it’s a good example of the power of sharing data. It’s the first time we’ve been able to see both sides of the payment – sending and receiving.”
Banking Fraud Stats
Online fraud prevention platform Seon highlighted the cost of fraud in a June publication. According to Seon, there was a 4.2% increase in the overall cost of fraud per dollar for all US retail services, including banks. The report puts specific fraud losses from bank payments at nearly $1.6 billion. In addition, Seon states that every $1 of fraud costs $4.23.
Another report states that APP fraud in the UK hit £479 million in 2020, with online banking fraud climbing 64% in 2019. The report also mentions that 47% of all UK bank fraud cases happened through remote banking channels. It adds that the average loss to the victim at £600 per case.
Mastercard Implements AI Fraud Detection Tool in Nine UK Banks to Prevent APP Scams
