Financial services provider Mastercard is leading the charge against payment fraud and scams with its AI-powered tool called “Consumer Fraud Risk.” The solution, now live in the UK, leverages Mastercard’s latest AI capabilities and its unique network view of account-to-account payments to help banks predict and prevent various types of scams.
According to an announcement, Mastercard has partnered with nine major UK banks, including Lloyds Bank, Halifax, Bank of Scotland, NatWest, Monzo, and TSB, to utilize large-scale payments data and identify payment scams in real-time before funds are transferred out of a victim’s account.
By tracing the flow of funds through a series of accounts and overlaying specific analysis factors such as account names, payment values, payer and payee history, and links to accounts associated with scams, the AI solution equips banks with the intelligence needed to intervene and halt fraudulent payments.
UK banks to combat fraud with MasterCard’s AI-powered solution
The announcement further stated that one of the first banks to adopt Mastercard’s Consumer Fraud Risk tool is TSB, which has already seen remarkable results in fraud detection within just four months. If TSB’s performance is replicated across all banks, the prevention of scam payments over a year could amount to nearly £100 million saved across the UK. Other banks are expected to adopt Consumer Fraud Risk throughout 2023, and Mastercard is exploring the potential expansion of the solution to international markets.
Fraudsters have increasingly turned to impersonation tactics, convincing individuals and businesses to transfer money under the false pretense of legitimate transactions. Known as “authorized push payment fraud” or APP fraud, it now accounts for 40% of UK bank fraud losses and is projected to cost $4.6 billion in the US and UK alone by 2026.
Banks have faced significant challenges in detecting these scams as customers willingly initiate the transactions without any security measures being compromised. This type of fraud undermines people’s confidence in online interactions, and Mastercard aims to rebuild and maintain that trust. By harnessing the power of AI technology, the company assists banks in identifying and predicting payments to fraudsters, effectively stopping them in real-time.
Mastercard has been a pioneer in AI technology, using it extensively across its business for the past decade. Its AI-powered cybersecurity solutions have successfully prevented over $35 billion in fraud losses in the last three years. The ability to detect fraudulent payments among millions of daily transactions has been a challenging task, but prevention and monitoring tools have become essential. Through its partnership with Mastercard, TSB has gained the intelligence necessary to identify fraudulent accounts and prevent funds from reaching them.
The initial results from banks using Consumer Fraud Risk have shown tremendous success in preventing scams, especially when combined with other customer insights. This has enabled banks to develop targeted fraud strategies and differentiate various types of scams, such as purchase scams, impersonation scams, and romance scams. Purchase scams currently account for 57% of scams in the UK and pose a significant challenge for banks.
In 2022, the UK reported 207,372 incidents of authorized push payment scams, resulting in gross losses of £485 million. Mastercard’s decision to roll out Consumer Fraud Risk in the UK first is rooted in its extensive experience in tracing and combating financial crime within the country’s real-time banking system. The company is also exploring other markets where the technology can be implemented effectively.
As the battle against payment fraud intensifies, Mastercard’s AI-powered solution marks a significant step forward in the fight against scammers. By providing banks with real-time intelligence, Mastercard aims to protect individuals and businesses from falling victim to fraudulent schemes. The success of this initiative will not only safeguard financial transactions but also restore trust in digital interactions.