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Banks and merchants must find ways to fill gaps in each other’s transaction intelligence to reverse trends around ever-growing fraud, and global payment partners hold the key.

Both banks and merchants have faced rising fraud in recent years, and it’s becoming harder to ignore the way that fraud suffered by one increasingly influences the other.

As much as the digitization of society and payments has created a wealth of convenience and opportunities for consumers, it has also done the same for

A major issue is stolen customer credentials, typically through phishing and smishing scams – the impact of this fraud spreads far and wide. Consumers can have their bank accounts emptied and financial reputations ruined by fraudsters using their credentials to create synthetic identities to commit further crimes, such as spending freely with unsuspecting merchants.

As the world faces increasingly challenging economic times, other types of fraud will grow, too. As disposable income is squeezed, more people will be tempted to commit first-party fraud or allow their accounts to be used as mules. Consumers are also able to link more alternative payment methods (APMs) to their bank accounts than before. Many of these are backed by start-ups who are yet to develop fully mature fraud prevention processes and policies. They often don’t have the kinds of strong artificial intelligence solutions seen in most major financial institutions and merchants.

And yet, banks and merchants are left to pick up the tab between them when these APMs are used to commit fraud.

Digital IDs are vital protections against fraud

Solving these challenges are key to banks’ and merchants’ continued ability to provide the frictionless experiences customers prefer while maintaining low rates of fraud.

A major part of the answer is having confidence in a consumer’s digital identity. Merchants and banks can’t set the threshold too high for authorizing or accepting payments, but And they need to be able to decide quickly so customers can move through the payments and purchasing journey in as few clicks as possible.

Fundamentally, the solution is about the data that accompany transactions. If handled correctly, there is enough information in that data to accurately predict when a customer is genuine.

The trouble is that each party to a transaction can only see their side of the overall data, and that’s not enough.

Turn to global payment provider for enhanced transaction intelligence

To fill the gap, banks and merchants can turn to their global payment partners. A partner with the right scale will sit at the center of a network of thousands of banks and merchants, meaning they see more sides of a consumer’s behavior more often.

Without creating privacy and compliance issues by sharing that data, they can drive more complete profiles of positive and negative behavior. And if they have the right technology to understand it, they will be able to drive decisions that keep fraud rates low while maximizing authorized payments or sales conversions.

Truly understanding the data is key to understanding a consumer’s digital identity because there may be changes in individual data elements that could indicate somebody pretending to be a consumer, such as using a different device, email or IP location. But using these insights to build effective fraud prevention is more nuanced than instantly flagging that kind of signal as suspicious. Contextual assessments with AI and network intelligence are also needed to ensure that when consumers simply change their habits, locations and devices, they can still continue their journey. Looking at how to accept transactions safely and minimize false positives is key to reducing the cost of managing fraud.

This is where a strong AI offering comes in. Rather than simply responding to data signals alone, robust AI models can combine them to better their digital identity, the way customers pay, who they pay and how much they tend to pay.

Remember: Criminals also have more access to data than ever

As such, there is a greater need for all parties in the payments chain to work together more closely. But if all parties are not prepared, there will still be visibility gaps that lead to more declined transactions.

Data privacy laws are absolutely important, but they also create visibility gaps that make it harder for banks and merchants to verify someone’s digital identity. And that means they also make it easier for fraudsters to get away with scams, account takeovers and creating synthetic identities.

The only way around the challenge of maintaining data privacy while increasing data intelligence is for all payment players to engage in the secure sharing of risk signals, such as network intelligence, to make sure all bases are covered

There is more evidence than ever that digital identities are great for creating strong customer experiences – just look at the investments being made in Web3 and metaverse technologies.

But developments like this also illustrate that the data available to fraudsters to leverage for their schemes is only going to grow, as well.

Learn More About Defeating Fraud with Powerful Machine Learning

director – Merchant Fraud Product

Amanda brings more than 15 years’ experience working in fintech to her current role as product director for ACI’s Merchant Fraud solution. Since joining ACI in 2007 she has held roles across sales, strategic relationship management and product management, with a specific focus on eCommerce fraud prevention. Amanda’s specific expertise is in leveraging data to enable risk-based screening for authentication, machine learning, artificial intelligence and behavioral analytics. Amanda applies these emerging technologies to payment fraud detection and prevention strategies. She also has a particular interest in using data intelligence for aiding conversion and removing friction from payment flows, helping to create value for ACI’s customers and key stakeholders.