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The Green Sheet Online Edition

September 11, 2023 • Issue 23:09:01

AI versus AI in the battle against credit card fraud

By Elie Y Katz
National Retail Solutions

AI fraud and scams have significantly risen, with 25 percent of global respondents experiencing AI voice-based scams, industry researchers have found. In 2022, fraud rates against contact centers increased by 40 percent, and Americans lost nearly $9 billion to fraud, marking an over 150 percent increase in just two years. Investment fraud alone accounted for losses of $3.82 billion, a 128 percent increase over 2021. In India, 83 percent of victims of AI voice scams reported monetary losses. 

The extent of AI fraud and scams, specifically in credit card processing, is alarming. Recent data revealed over 389,000 reports of credit card fraud to the Federal Trade Commission (FTC) in 2021. On a global scale, credit card fraud resulted in over $32 billion in losses in the same year. 

Double-edged sword driving innovation and fraud

AI-driven scams have evolved in sophistication, leveraging advanced technologies to carry out fraudulent activities. One of the most common forms of AI-driven scams is phishing, where fraudsters use AI to generate convincing emails, tricking recipients into revealing their credit card information.

Another prevalent scam known as vishing involves using AI to clone voices. In these scams, criminals impersonate trusted individuals over the phone, persuading victims to disclose sensitive information or carry out transactions that result in financial loss.

ChatGPT users have ingeniously leveraged AI to bypass paywalls on news sites. They provide the chatbot with links to articles. Following its programming, the chatbot retrieves the text from the linked articles, even those behind paywalls, and presents it to the user. This workaround has proven effective, demonstrating how AI can navigate digital barriers. As a result, the research and development company OpenAI suspended ChatGPT's web browsing capabilities.

Rising storm in AI credit card fraud

These scams have a significant impact on credit card processing. They lead to financial losses for individuals and businesses and undermine trust in digital payment systems. The increasing sophistication of these scams makes them harder to detect and prevent, posing a significant challenge to individuals, businesses, and financial institutions. As such, a pressing need exists for robust, practical solutions to combat AI fraud and scams in credit card processing.

Yet the very technology that powers these scams also provides the solution. AI's capacity to sift through vast data, spot patterns and learn from past events makes it a powerful tool for detecting and stopping fraud.

AI is becoming a strong ally in the fight against AI-driven fraud. When organizations integrate AI fraud detection tools with current systems, they can significantly improve their fraud detection and prevention, protecting their operations and customers. More than 63 percent of recently queried financial institutions using AI indicated they believe it can stop fraud before it even occurs.

Big banks turn to AI for help 

Several leading financial institutions have successfully implemented AI to combat credit card fraud. Mastercard, for instance, uses its Decision Intelligence technology, an AI-driven system that analyzes cardholders' historical shopping and spending habits to set a behavioral baseline. The system uses this baseline to compare each new transaction, actively detecting anomalies that might suggest fraud.

Similarly, SEB Bank uses AI to analyze customer behavior and identify anomalies that may indicate fraudulent activity, enabling the bank to detect and prevent fraudulent activities in real-time. JPMorgan Chase also employs AI to analyze customer data and identify potential fraud cases. The bank's AI model has demonstrated high accuracy in detecting fraudulent activities, significantly reducing the number of false positives.

AI-based fraud detection has advantages over traditional methods, especially in credit card processing. AI's real-time monitoring, data integration and continuous learning make it a strong ally in the fight against credit card fraud.

But remember, AI isn't a standalone solution. It works best when used alongside traditional methods. Combining both strengths can create a robust defense against credit card fraud. As we look to the future, AI's role in fraud detection will only grow, opening up new ways to secure our financial systems and protect us from fraud. end of article

Elie Y. Katz is founder, president and CEO at National Retail Solutions (NRS), https://nrsplus.com. Contact him by phone at 201-715-5179 or by email at ekatz@nrsplus.com.

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