Can AI Solve The Age-Old Woes Of Payment Frauds?

Have you experienced payment declines despite having sufficient balance? There is a high chance it was due to being accidentally flagged as a fraudulent transaction. #SayWhat

A few decades ago, merchants relied on numerous employees to detect fraudulent transactions. With the advent of sophisticated software and fraud detection tools, the process became rule-based.

Currently, merchants experience challenges as denying genuine transactions can result in a bad reputation. According to PYMNTS, in 2020, around $600+ billion was lost in global e-commerce revenue due to false declines. Additionally, Riskified found that 28% of customers abandon purchases if declined, while 14% move to competitors.

According to NICE Actimize CEO, Craig Costigan, “Fraudsters are leveraging faster payments innovation to conduct sophisticated scams involving money mules who transfer funds away from the FI—funds that are often unrecoverable. As the digital landscape evolves, so do fraudsters’ tactics. The threats identified in our report are a glaring reminder of the ever-present risk that looms over digital channels and payments. Financial institutions must fortify their defenses, and review digital channel controls, to stay ahead of new and emerging threats.”

Despite all efforts, fraud is on the rise. Juniper Research believes that by 2027, merchants will lose more than $343 billion globally to frauds.


However, experts believe that artificial intelligence (AI) is here to enhance fraud detection and why not - it is already transforming every industry!

Artificial intelligence in fraud detection allows the process to move beyond rigid rule-based methods. Fraud detection AI allows adaptive learning by studying behavioral patterns from large data pools. This adds flexibility as it can provide adaptive, instant, on-the-fly detection.

Regarding this, Tobias Schweiger, CEO and Co-founder of Hawk AI said, “We believe that cutting-edge, real-time financial monitoring technology can deliver the change needed to fight today’s sophisticated fraud and money laundering. Operating a safe financial ecosystem requires fintechs, banks and other organizations to deploy technology-backed tools and infrastructure that accurately inform and alert institutions to impending concerns. We are excited to aid CSI’s empowerment of its customers against the constantly evolving threats of fraud and money laundering with explainable AI.”


This can also help in debunking “friendly fraud”, where people try to avoid paying for purchases by claiming missing items, returning empty packages or with used items. AI can gather relevant information such as IP addresses, biological markers or behavioral analytics to crosscheck customer history to reduce this trend.

The advantages AI in fraud detection offers are massive as its adaptive, accurate and instant.

Do you think artificial intelligence (AI) will help solve the woes of online payment fraud? Let us know in the comments below!