Buy with your eyes: Tech like biometrics, AI used to combat payment fraud

As billions of dollars continue to be lost worldwide to credit card fraud annually, the payments industry is using new tools to fight back.

This includes efforts by payments giant Mastercard, which has invested US$7 billion (S$9.2 billion) in cyber security and artificial intelligence (AI) capabilities over the last five years.

One promising area is the use of biometrics for in-store and even online purchases, said Matthew Driver, Mastercard’s executive vice-president and head of services, Asia-Pacific.

In June, Mastercard launched its first pilot in Europe in partnership with fintech start-up PayEye, and Empik, a Polish chain that sells media products like books and newspapers. At five selected Empik stores, customers can pay using iris and facial biometrics at a special point-of-sale terminal. Customers need to register via PayEye’s mobile app before using the biometric check-out.

To address privacy concerns while ensuring security and performance, Driver shared that Mastercard has introduced the biometric check-out program, which is governed by its principles for data responsibility.

The program includes guidelines for banks, merchants, and technology providers to adhere to when using a customer’s biometric data for authentication.

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“We collaborate with different industries, and between the public and private sectors, to continue to define more robust security standards to fortify trust across the ecosystem,” said Driver. “For technology-enabled innovations to be sustainable, they need to be safe, secure and reliable.”

Tackling fraud

Another initiative is Mastercard’s partnership with major banks in the United Kingdom to implement an AI-based network-level system to predict and prevent real-time payment fraud, known as Consumer Fraud Risk (CFR).

“Since financial institutions only see within their own systems, they use Mastercard at the network level to monitor push-payment requests and transaction data,” said Driver.

CFR provides a real-time predictive risk score on whether a request made by a customer to their bank is potentially fraudulent by analysing multiple transaction data points. This enables banks to intercept suspicious transactions before funds are transferred.

Since early 2023, Mastercard’s solution has been used by 11 UK banks to stop scam payments before funds leave the victim’s account.

Data from the Payment Systems Regulator, a UK regulatory body, showed a 12 per cent reduction in the total value of authorised push payment (APP) fraud at 14 banks, from £389 million (S$665 million) to £341 million last year.

The scam occurs when victims are tricked into authorising payments to fraudsters. “This AI intervention, operating at millisecond speed, has drawn interest from law enforcement agencies and banks from around the world,” Driver said.

He also highlighted the Mastercard Payment Passkey Service, which uses tokenisation to protect customers from fraud. Tokenisation is the process of reconfiguring payment credentials as unique tokens, adding another layer of security beyond encryption. This ensures that the token is unusable even if intercepted by hackers.

“Securing the digital ecosystem requires a consolidated effort from everyone,” emphasised Driver, adding that wider collaboration with adjacent sectors like telecommunications, social media and internet firms is critical.

This was produced in partnership with the Monetary Authority of Singapore and the Global Finance & Technology Network.

For more stories, go to https://bt.sg/sff2024