Financial fraud in the IoT environment is a fast-growing issue since the mobile channel can facilitate nearly any type of payment. Due to the rapid increase in mobile commerce and the expansion of the IoT environment, financial fraud in mobile payment has arisen and become more common. More than 87% of merchants support either a mobile site or a mobile application for online shopping. 

Financial fraud can occur in several ways, but the most frequent case is an unauthorized use of mobile payment via credit card number or certification number. Financial fraud via credit card can be classified into two main categories based on the presence of a credit card: To commit credit card fraud with a physical card offline, an attacker has to steal the credit card to carry out the fraudulent transactions. Online credit card fraud that does not require the presence of a credit card mainly occurs in IoT environments since the payment under an IoT environment does not require the presence of a physical payment tool; instead, it needs some information such as card number, expiration date, card verification code, and PIN to make the fraudulent payment. 

For this reason, financial fraud, which usually occurs in the IoT environment, is the most frequent type of fraud involving taking or modifying credit card information. Financial institutions employ fraud prevention tools like real-time credit authorization, address verification systems (AVS), card verification values, and positive and negative lists to address the problem of rapidly rising fraud in the IoT environment. 

Mastercard’s AI

Mastercard has introduced a generative artificial intelligence (AI) solution to help prevent fraudulent transactions. Mastercard’s world-leading Decision Intelligence (DI) - a real-time decisioning solution - already helps banks score and safely approve 143 billion transactions a year. New generative AI technology will scan an unprecedented one trillion data points to predict whether a transaction is likely genuine, building Mastercard’s ability to analyze account, purchase, merchant and device information in real time.

The next-generation technology, Decision Intelligence Pro, assesses the relationships between multiple entities surrounding a transaction to determine its risk. In less than 50 milliseconds, this technology improves the overall DI score, sharpening the data provided to banks. Initial modelling shows AI enhancements boost fraud detection rates by 20% on average and as high as 300% in some instances.

According to Ajay Bhalla, President of Cyber and Intelligence at Mastercard, 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. Supercharging our algorithm will improve our ability to anticipate the next potential fraudulent event, instilling trust into every interaction.

The enhancement of DI will further improve banks’ ability to protect cardholders from fraudulent transactions and mitigate what is known as false positives: legitimate transactions that are incorrectly flagged as fraudulent ones.

Bhalla opined that the precision of the solution – achieved by scanning potential points of sale in real-time - has been shown in our analysis to increase accuracy and reduce the number of false positives by more than 85%. 

Source:

Mastercard