Can AI Be The Solution To CNP Fraud?

Artificial Intelligence (AI) has come a long way in the past decade. AI is now performing repetitive jobs like farming and flipping burgers but it also doing other tasks long considered to be the sole domain of the human like composing music and creating works of art. AI now could also be here to help stamp out credit card fraud.

Card-Not-Present (CNP) fraud affects everyone. Merchants are defrauded out of merchandise and consumers have fraudulent charges put on their cards. While trying to stamp CNP fraud out it is believed that as much as 30% of all declines could be false declines, which hurts everyone involved. These false declines have the potential to undermine the consumer’s faith in a merchant and nothing good can come of that.

Enter AI

Fraud rules can be a double-edged sword. If a merchant loosens them they could set themselves up for massive fraud losses and if they are too stringent they could drive away customers. What is the solution? AI.

Machine learning is being implemented to try to stop CNP fraud. It takes the data from customers to build a profile of that person’s purchasing history. AI is used to build a model of that person and to predict their behavior. Every new transaction provides more information and a new opportunity to learn and build on a profile.

Downsides

Of course there are downsides. In today’s information age many people are wary about having their information available to even AI. Considering this will be available potentially to individual merchants data security will need to be paramount and PCI compliance will need to become more strict and taken more seriously by merchants all across the country. That might not be a bad thing.

The other is what would happen if someone attempts to buy something that is outside of their normal habits or from a merchant that they normally do not do business? Will that transaction be declined simply because AI would think it is out of the norm and it represents a good chance of CNP fraud? That could set everyone right back to square one.

More than likely AI will be something that is something that will be implemented by larger corporations to start as a system like this will be expensive to implement and maintain. It does have the potential to make payment systems operate much smoother and take a bite out of CNP fraud. That alone can help everyone and that is a good thing.