60% of the Acquirers Using AI Systems to Detect Fraud Consider It Their Most Important Anti-Fraud Tool

The banking industry has been faster than most in adopting artificial intelligence (AI). Banks have found that AI is extremely useful in fighting fraud because it helps to flag suspicious transactions in real time. This feature is especially useful in the high-volume business of processing card transactions for retailers and other merchants. AI helps acquiring banks and merchants determine appropriate responses when suspicious transactions are flagged.

These are among the key findings from AI In Focus: Waging Digital Warfare Against Payments Fraud, a collaboration between PYMNTS and Brighterion, a Mastercard company. We examine how acquiring banks use AI and effective merchant monitoring to combat credit, debit and prepaid card fraud. The playbook is based on a survey of 104 executives from acquiring banks in the United States from Sept. 22 to Oct. 14. The executives have leadership responsibilities and a deep understanding of the merchant debit, credit and prepaid card acceptance business. Their expertise covers risk management, transaction fraud, fraud detection/analysis and merchant monitoring.

More key findings from the study include:

Seventy-five percent of acquiring banks use AI to fight fraud, and 88% of those that do not use AI plan to adopt such systems to combat fraud within the next year. Acquirers’ increased reliance upon AI coincides with the rapid changes and increased transaction volumes that have come about from the pandemic. Online shopping has increased sharply, as has the use of credit, debit and prepaid cards and other digital and online payments.

Ninety-three percent of all acquirers say they see more fraudulent transactions now than one year ago. Acquirers also recognize the threat that fraud poses to their business, as 88% said they believe that reducing fraud is crucial to their ability to increase or maintain merchant-processing revenue. No acquirer is immune to credit and debit card fraud, but those that use AI for fraud detection face attacks somewhat less frequently than those that do not.

Forty-one percent of acquirers using AI systems to detect transaction fraud say its ability to flag suspicious transactions is its most important benefit. Another 41% say AI’s anti-fraud features are an important benefit, but that other benefits matter too. AI systems can improve operational efficiencies and enhance acquirers’ broader anti-fraud efforts. Nearly half of the acquirers that use AI to detect fraud also say it has helped them reduce the personnel needed for their anti-fraud efforts.

Acquirers are under significant pressure to protect themselves and their merchant clients from payments fraud, and they are turning to AI systems for help. This is not surprising, given the high importance of the merchant card business for acquirers and how fraud detection strongly impacts revenue growth. PYMNTS research shows a high adoption rate for AI systems and finds no signs of this trend abating. Most banks that have yet to implement these systems will have done so by this time next year. Acquirers are using AI to fight fraud and reap the benefits of increasing payments volumes.

To learn more about how acquiring banks use AI to combat payments and transaction fraud, download the playbook.