Impersonation fraud has long been a persistent threat to individuals and businesses, causing significant financial losses. However, Mastercard is leading the charge against fraudsters with its groundbreaking "Consumer Fraud Risk" solution, powered by advanced artificial intelligence (AI). Initially launched in the UK, this innovative technology empowers banks to detect and prevent fraudulent payments, ensuring the security of their customers' funds.
Mastercard's approach leverages its extensive network perspective, combining large-scale payment data from nine leading UK banks, including Lloyds Bank, Halifax, Bank of Scotland, NatWest, Monzo, and TSB. By analyzing account-to-account transfers in real-time, the AI-powered system can proactively identify payment scams before money even leaves a victim's account, providing a crucial layer of protection.
One of the primary tactics employed by organized criminals is to stash stolen funds in "mule" accounts. Mastercard has been collaborating closely with UK banks for five years to track these illicit funds and promptly shut down such accounts.
With its AI solution, Mastercard equips banks with the intelligence necessary to intervene and prevent fraudulent payments, scrutinizing various factors such as tracing activity, account names, payment values, payer and payee histories, and connections to scam accounts. This comprehensive analysis ensures that payments are halted before funds are lost to fraudsters.
Furthermore, the success of Mastercard's Consumer Fraud Risk solution is exemplified by TSB, a prominent UK bank. TSB reports significant improvements in fraud detection within a mere four months of implementing the system.
Extrapolating these results to all banks across the UK, it is estimated that if all banks perform as effectively as TSB, over $130.42 million could be saved annually by averting scam payments. Encouraged by this success, Mastercard is actively exploring international markets to scale up its Consumer Fraud Risk solution, allowing more banks worldwide to benefit from this cutting-edge technology.
Impersonation fraud has become increasingly prevalent as banking and payment security measures have improved. Fraudsters exploit people's trust to coerce them into transferring funds to friends, suppliers, or for the purchase of counterfeit goods online. Known as "authorized push payment fraud" (APP fraud), it already accounts for a staggering 40% of UK bank fraud losses and is projected to cost $4.6 billion in the US and UK combined by 2026.
Ajay Bhalla, Mastercard's President of Cyber and Intelligence, acknowledges that these scams have posed significant challenges for banks as the customers themselves willingly initiate these transactions, bypassing traditional security measures. However, Mastercard's AI technology fills this critical gap by helping banks identify and predict fraudulent payments, putting a stop to them in real-time. With the goal of building trust and bolstering online confidence, Mastercard's approach is centered around providing cutting-edge AI tools that enhance fraud detection capabilities.
Mastercard's AI capabilities have been honed over a decade, and they have become an integral tool across their business operations. The application of AI has revolutionized fraud detection, resulting in the prevention of a staggering $35 billion in damages over three years.
Furthermore, Paul Davis, Director of Fraud Prevention at TSB, emphasizes the importance of prevention and monitoring tools in the fight against fraud. Given the sheer volume of payments made daily, spotting fraudulent transactions amidst this sea of legitimate transactions can be likened to finding a needle in a haystack. However, with Mastercard's AI-powered Consumer Fraud Risk solution, banks gain access to the intelligence needed to identify fraudulent accounts and prevent unauthorized payments.
Combining the Consumer Fraud Risk Score with other customer and behavioral insights has proven to be highly successful in preventing scams, including purchase, impersonation, and romance scams. Purchase scams, which account for 57% of UK scams, continue to plague financial institutions, but with the advent of Mastercard's advanced technology, banks are now better equipped to combat these fraudulent activities.
In 2022 alone, there were 207,372 approved push payment (APP) frauds in the UK, resulting in approximately $634 million in damages. These alarming figures underscore the urgent need for effective fraud prevention measures. With its vast experience in tracing and combating financial crime within the real-time banking system, Mastercard's decision to launch Consumer Fraud Risk in the UK first is a testament to its commitment to combating fraud and its dedication to safeguarding financial systems.
As the success of the Consumer Fraud Risk solution continues to unfold in the UK, Mastercard is actively identifying the next best markets for this groundbreaking technology.