Fintech & Ecommerce

Nine British Banks Sign Up to New AI Tool for Tackling Scams

Mastercard has launched sales of an artificial intelligence-based tool with which financial institutions can record customers’ attempts to transfer money to fraudsters.

Nine British Banks Sign Up to New AI Tool for Tackling Scams

The registration procedure required to gain access to the consumer fraud risk management system has been completed by nine of the UK’s largest lenders, including such giants of the local banking sector as Lloyds Banking Group, Natwest Group, and Bank of Scotland.

The AI tool was trained on a database consisting of arrays of transaction information that have been formed over the years. This anti-fraud mechanism helps to establish the degree of probability that in the case of a specific financial operation of a bank client, there is a risk of transferring money to an account associated with fraud with authorized push payments. This type of fraud consists of the fact that the victim, as a result of manipulations, the purpose of which is deception, makes a transaction, formally acting in the status of a payee.

The tool based on artificial intelligence appeared against the background of the preparation of the British banking sector for a new system of regulation of payment services. The new rules provide for the obligation of financial institutions to pay compensation to customers who have suffered as a result of application fraud. This rule will take effect from next year. Currently, banks are not responsible for fraud, although some financial institutions have voluntarily decided to compensate customers affected by the actions of criminals.

Ajay Bhalla, Mastercard’s president of cybersecurity and intelligence, says that application fraud is a huge problem that lenders have tried to detect without much success since the accounts of fraud victims have not been compromised. He noted that in this case, in fact, customers voluntarily make transactions, for which reason there are no obstacles associated with passing security checks designed to prevent criminal encroachments.

The results of a study by the UK Banking Industry Association Finance indicate that last year in this country, as a result of fraud with applications, citizens suffered damage in the amount of $ 616 million. The ACI Worldwide and GlobalData report predicts that by 2026 the total amount of this damage in the UK and the US will reach $ 5.25 billion.

Four months ago, TSB Banking Group became the first financial institution to implement a consumer fraud risk management system. The head of the bank’s anti-fraud department, Paul Davis, said that the use of an artificial intelligence-based tool allowed for a 20% increase in the number of recorded attempts at criminal encroachment. Also, according to him, the mass implementation of this system in the UK banking industry would allow lenders to save about 127 million dollars a year in total.

Paul Davis says that the consumer fraud risk management system is an example of positive data exchange opportunities. He noted that this tool made it possible to see both sides of the payment, including sending funds and receiving them.

The security system evaluates the degree of risk probability in less than a second for any attempt at a bank transfer. A financial institution can combine this analysis with its own estimates and block the transaction until the money is sent from the client’s account if such a need arises.

Paul Davis noted the high level of efficiency of the AI-based tool in detecting fraud when making purchases. Criminals fraudulently forced people to pay for goods and services that were not received in the end. Such cases account for about 50% of the structure of application fraud.

Mastercard can provide a qualitative risk assessment because the company manages the infrastructure for electronic money transfers through its subsidiary Vocalink. Over the past five years, the firm, in cooperation with British lenders, has been analyzing how fraudsters transfer their income using accounts in several banks.

The company plans to introduce an AI-based tool around the world. Currently, this issue is being discussed with potential clients around the world, including organizations from the USA, Australia, and India.

As we have reported earlier, Resistant AI Raises $11 Million for Security Solutions.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.