Over the course of the past year, the rise in contactless payments has brought an uptick in fraud across ecommerce. Clearly, the tools that many banks use to identify and mitigate fraud are not keeping pace with the criminals that perpetrate it.
Despite challenger and neobanks prompting a "digital first" approach within the banking community, many have not kept pace with rapid digitisation that has changed the way customers pay for goods and services. Criminals are outstripping legacy banks, and card fraud losses are set to rise from $32 billion in 2020 to $47 billion by 2027.
The good news is that banks can significantly ramp up their fraud prevention controls through advanced analytics at the payment processor level. Artificial Intelligence (AI) can let banks spot suspicious transactions at the point of customer spend.
Historically, the processing industry has been governed by large, legacy operators and this has led to a lack of forward movement in terms of what processing can offer to banks. However, banks are finally starting to digitise en masse and seeking to be more involved in the cardholder spend journey. In order to do this, they need to be engaged with cardholder activity data.
By working with processors that can deliver data-driven insight at the point of transaction, banks can improve detection of unusual behaviours that fall outside of expected customer activity profiles. This allows them to build more effective fraud defences over time.
Modern payment processors using AI to interpret and analyze trends and point-of-spend data can detect fraud across ecommerce in real time and provide that knowledge onwards to the bank just as quickly. Banks can then instantly communicate with consumers to warn them of the fraud.
Equally important, analytics-driven processors can arm banks with the tools to improve customer experience: a critical component for them to remain competitive in an increasingly diverse banking environment. Equipped with AI, embedded into their payment processing, banks will even be able to offer personalised products to consumers at point of spend. This could be anything from offering excess insurance for their car rental to buy now pay later or even credit on large ticket items.
AI and analytics are driving transformation across almost every industry; but, the pace of change within the banking industry is increasing. Banks will have to look to their processors and decide whether their legacy relationships will best service their future evolution.
