How major credit card networks are using artificial intelligence to fight fraudsters


When it comes to preventing credit card fraud, the companies that issue your credit cards and the payment networks they run (Visa, Mastercard, Discover and American Express) do a lot to keep your identity and transactions safe. But is it enough?

For much of the past decade, one way these networks have kept transactions secure is by leveraging artificial intelligence and machine learning programs.

However, as fraud protection advances, so do the tools and scams fraudsters use to obtain your information. According to the Federal Trade Commission, total fraud losses in the United States will reach $10 billion by 2023, a 14% increase from fraud losses in 2022.

Credit and debit card losses totaled $466 million in 2023, according to the FTC's Consumer Sentinel Network book. The report ranks identity theft as the most prevalent form of credit card fraud.

Although the numbers are daunting, there are still ways you can help protect your card information from bad actors. Credit card issuers have a range of tools to help protect your information, and you as an individual can take some precautions to keep your information safe.

How can artificial intelligence help prevent fraud?

Artificial intelligence makes it possible to sift through trillions of data points in the blink of an eye. It helps card networks, and in turn, banks that issue credit cards, determine almost instantly whether a transaction is legitimate.

“What we try to do is determine [your] When the transaction reaches the network. So we're building these artificial intelligence models to try to identify trading patterns. we can actually stop [fraud] said James Mirfin, Senior Vice President and Head of Global Risk and Identity Solutions at Visa.

Common types of fraud

According to Equifax, one of the three major credit bureaus, there are four common types of credit card fraud.

  • Card cloning: This usually happens after your card information has been stolen. The bad actor will then print this onto a blank card so it can be used for unauthorized charges.
  • Skimming: This form of fraud involves a tool called a skimmer. It's hidden in legitimate card scanners, like those found at ATMs and gas pumps. It copies the information contained in your card's magnetic strip and saves it for fraudsters to use.
  • No card: This happens when your card information is stolen during a card-not-present transaction. CNP transactions include online, phone or mail order orders – any time you make a purchase and the merchant cannot see your physical card. This can also happen during a data breach, phishing scam, or malware attack.
  • Present card: When someone uses a cloned card or otherwise fraudulently copies card information to make unauthorized purchases in person.

According to the FTC report, imposter scams, online shopping scams, and prize, sweepstakes, and lottery scams are the most common. The report also found that social media platforms are a common venue for online shopping scams.

Additionally, romance scams remain popular, with scammers using artificial intelligence to defraud their victims. Scammers are leveraging generative artificial intelligence to create advanced phishing campaigns, deepfake dating profiles and voice cloning to deceive loved ones, according to Visa’s semi-annual threat report.

“Two years ago, if you received a phishing email, it was [filled with] Grammatical errors. Now, [bad actors] Generative artificial intelligence is being used to create very, very good phishing emails,” Mirfin said.

He points out that a few years ago, it was relatively easy to pick out an AI-generated voice. “Now, they can do instant voice cloning from a small sample of someone's voice.”

How to prevent fraud online

Each card network uses artificial intelligence to help ensure your transaction is legal. But they all use different tools to do this.

visa

Visa recently announced new payments technology that uses artificial intelligence to keep your card information more secure. The card network uses biometrics for online transactions and allows people to store all payment methods in a single voucher, potentially eliminating the need to carry a physical card.

Additionally, Visa’s Advanced Authorization uses machine learning models to detect fraudulent transactions. The company has three AI-powered solutions that help reduce fraud during account-to-account transactions (such as through Venmo or Zelle) and card-not-present transactions.

“They are all designed to protect transactions on the Internet,” Milfin said, noting that the products run in the background, so you may not be aware of them. “You should trust that the transaction will be successful and that no one else will be able to use your credentials.”

MasterCard

Mastercard uses the speed of generated artificial intelligence to prevent fraudulent transactions. Its decision intelligence helps banks score and approve billions of transactions every year.

“Enhancing our algorithms will improve our ability to predict the next potential fraud incident,” Ajay Bhalla, Mastercard's president of cyber and intelligence, said in a press release announcing Decision Intelligence.

American Express

American Express uses machine learning-driven fraud detection to monitor and detect fraud when using your American Express card. According to networks and card issuers, fraud detection technology covers $1.2 trillion in transaction value annually. American Express is also an early developer of artificial intelligence fraud detection tools.

Discover

Discover uses machine learning-based fraud detection tools to help prevent fraud and help its business partners avoid supply chain shortages.

“We are leveraging artificial intelligence to help monitor, detect and alert our partners of potential fraud,” said Andrew Stucchio, vice president. “Many of our partners are using artificial intelligence for prediction and automation to more accurately predict demand and Adjust inventory and staffing.

Discover also has a program called ProtectBuy that authenticates customers at the time of purchase. It requires merchants, networks and issuers to verify that sales are not fraudulent. If a transaction is flagged as fraudulent, a one-time password is sent to the cardholder to confirm the transaction.

What you can do to protect yourself from credit card fraud

While your card network is doing everything they can to help keep your information safe, there are steps you can take to help keep your card information safe.

  • register Free credit monitoring service. There are free apps that can monitor the dark web for your personal messages, including your email, address, passwords or social security number.
  • update your Antivirus protection. If you frequently shop via computer, make sure your virus protection software is up to date. This helps prevent any malicious software from stealing your information.
  • use Virtual card number When shopping online. A virtual card number is a unique number that replaces the physical number on the actual card. It prevents merchants from saving your card information.

bottom line

Artificial intelligence is used for protection and attack. Networks such as Visa and Mastercard use this developing technology to detect fraud in transactions made online. At the same time, the tactics used by criminals are also supported by artificial intelligence, especially thanks to voice cloning and generative artificial intelligence platforms.

“Visa has spent $10 billion over the last five years on technology and innovation to try to stay ahead of the curve,” Mirfin said. “But this is just an arms race.”

The editorial content on this page is based solely on the objective, independent assessment of our authors and is not influenced by advertising or partnerships. It is not provided or commissioned by any third party. However, we may receive compensation when you click on links to products or services provided by our partners.



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