AI Is Increasingly a Useful Tool to Spot Fraud

Financial institutions are constantly looking to add new tools to prevent fraud—and AI might be the best one yet.

Whether its credit card companies or financial markets, AI is letting the people who handle your money better protect it against hackers and fraudsters, searching for red flags at a pace that wasn’t even dreamed about a few years ago.

Mastercard, last month, unveiled a new generative AI tool called Decision Intelligence Pro, which the company says can scan one trillion data points in less than 50 milliseconds. That boosts fraud detection rates by 20% on average, says Mastercard. And in some instances, the increase is as high as 300%.

“With generative AI we are transforming the speed and accuracy of our anti-fraud solutions, deflecting the efforts of criminals, and protecting banks and their customers,” said Ajay Bhalla, president of Cyber and Intelligence at Mastercard. “Supercharging our algorithm will improve our ability to anticipate the next potential fraudulent event, instilling trust into every interaction.”

Over the past five years, Mastercard has spent $7 billion on cybersecurity, as both the company and the hackers trying to penetrate it have used AI as a tool. With $9 trillion worth of transactions processed last year, Mastercard is a prominent target.

So, for that matter, is Nasdaq. And the organization is using AI in a very significant way: as part of its efforts to root out financial crimes, president and CEO Adena Friedman announced in January.

People who are engaged in criminal activities such as child trafficking, terrorism or fraud “use the financial system differently,” said Friedman at CES. “What we’ve been able to do is capture those specific behaviors and write an AI model from them to predict what could be coming…and then give that information over to the banks and give them efficient workflows to do all the research they need to do to determine if [the activity] is criminal.”

Because AI is still such a new technology model, financial institutions are moving cautiously, with governance models in place. But the results have been encouraging. Not only are companies better able to spot fraud and patterns that accompany it, they’re doing so more accurately than ever, with Mastercard reporting a better than 85% reduction in false positives.

Visa, meanwhile, says it’s using generative AI to boost efficiencies in engineering, employee productivity and to develop new products and services for its customers. The company said it has invested more than $3 billion in the technology to both bring about a new era of financial services and protect its clients and cardholders from fraud.

The story’s the same at many other financial institutions. A 2020 report from McKinsey estimates AI technologies could be worth up to $1 trillion for global banks, taking over and improving on mundane tasks, such as high-frequency trades, marketing and fraud detection.

“To remain competitive, incumbent banks must become ‘AI first’ in vision and execution,” the report reads. “If fully integrated, these capabilities can strengthen engagement significantly, supporting customers’ financial activities across diverse online and physical contexts with intelligent, highly personalized solutions delivered through an interface that is intuitive, seamless, and fast.”

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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