Reusable IDs and AI Help Merchants Beat Back the Fraudsters

The fraudsters are racking up the gains, seeking, as they always do, to exploit vulnerabilities in card-not-present transactions.

And now, they’re harnessing artificial intelligence (AI) to skirt traditional fraud detection defenses to pass themselves off as people they’re not, preying on consumers’ trust.

The situation’s already dire. Not all that long ago — at the end of last year, in fact — Brad Wiskirchen, SVP and GM at Kount, an Equifax Company, noted that retailers would have, over the course of five years, lost a cumulative $130 billion in card-not-present fraud by 2023.

And the larger backdrop of payments fraud could be multiples of that tally, touching more than $340 billion through the next five years, per Juniper Research.

“We’re definitely on trend” to meet those numbers, he told Webster in a recent interview, as we’re already midway into June and at the halfway point of the year.

“The bad guys are on plan,” he said, noting that no matter where one looks, there’s been no significant decrease in fraud trends. He offered up some qualitative evidence of his own: The number of calls he gets from his own circle of friends and family about suspicious emails, calls and texts has ratcheted up to new levels.

“Holy cow,” he said. “The sheer volume of it all.”

AI in the Mix

From Wiskirchen’s vantage point — Webster’s tongue-in-cheek moniker for him is the “man the fraudsters fear” — the battle right now is one akin to playing whack-a-mole.

With every wave of technological innovation, he said, there’s the opportunity for fraudsters to find new attack vectors — and Kount, he said, has seen a rise in refund schemes, among others.

The rise of AI? Well, that has given rise to impersonation fraud that’s hard to catch, where the criminals mimic trusted authority figures or friends and family members … right down to their voices.

“It used to be something that we had an advantage over them,” he said of AI and the fraudsters, “because we have the data analysts and scientists and the supervised and unsupervised machine learning.” However, AI is becoming accessible enough so that the average high schooler embracing AI to write papers could adopt it to commit fraud.

But as he said of Kount and other enterprises focused on fraud detection and prevention, “we’re actually moving aggressively to extend what we’ve already been doing for over a decade when it comes to AI and machine learning to continue to stay ahead” of the criminals.

The best strategy, he said, is to fight AI … with AI.

“It’s almost like the 1980s with the proliferation of nuclear weapons,” he said. Kount, for its part, has been working with Google — Kount and Equifax enjoy what he termed “an enormous data advantage” in financial services — getting early access to the tech giant’s tools to help build out new fraud-fighting defenses.

But even though the bad guys don’t follow the rules, he said, “We’re looking at security and governance when it comes to leveraging AI tools and maintaining the highest standard in the world for protecting personal information” as the company layers generative AI into decision making and predictive modeling.

Breaking Down the Silos

At a high level, his own advice to companies seeking to build robust anti-fraud defenses has been to leverage their data across Equifax and Kount’s entire platform as opposed to isolating it across different silos.

“The same data can be used at every single point of interaction with their consumers to reaffirm who that consumer is and therefore streamline and reduce friction and increase customer satisfaction,” he told Webster.

The evolution of fraud defenses will include a growing embrace of reusable identity, where verified credentials follow individuals online and offline.

“This is where things are headed,” he said, “and it can be deployed globally.”

There’s been an increasing interest on the part of companies to broaden their crime-fighting toolboxes, Wiskirchen said — and to make the investments needed to get there. The need to do so is universal — spanning smaller firms all the way up to multinational corporations and globe-spanning eCommerce platforms.

As he noted: “When your hair’s on fire you don’t spend too much time thinking about how much the bucket of water is going to cost.”