Payments have the potential to improve the well-being of people around the world, but, like many industries, there are always bad actors seeking to exploit vulnerable individuals through fraud.
What makes payment fraud especially damaging is its ability to strip people and businesses of their financial security. The consequences can extend beyond finances, affecting mental health, relationships and overall stability.
This is why the payments industry is locked in an ongoing battle against fraudsters, working relentlessly to detect, prevent and combat fraud.
As the year draws to a close, Payment Expert reflects on some of the key perspectives and developments in the fight against fraud over the past 12 months.
SEON – the sophistication of fraud
Fraud is a critical issue often discussed at major events like Money20/20, and this feature stems from that very event. Earlier this year in Amsterdam, Payment Expert had the opportunity to speak with Logan Porter, Director of Solution Engineering at SEON, to discuss how the payments industry is managing fraud prevention.
Porter’s primary focus was on the increasing ‘sophistication of fraud’, which is driven by the ongoing digitisation of payments and the significant rewards it offers to malicious actors. During the interview, Porter provided insights into just how seriously criminals are approaching fraud.
He explained: “We’re seeing an increase in the complexity and the sophistication of APP fraud, with the proliferation of tools that allow for voice spoofing.
“We’ve also seen a rise over the last several years of fraud as a service, which has meant that companies have to be very vigilant and take very proactive steps in order to tackle fraud head on.”
LiveScore Group – the arms race against fraud
As the year progressed, Payment Expert gained valuable insights into what makes a fraud team effective. In a discussion with Rahul Das, Director of Payments at LiveScore Group, he shared his experience of managing fraud on a daily basis.
He said: “The fraud is multi-layered, with multiple objectives. Each of these objectives (e.g. impersonation fraud vs. access funds from stolen payment instruments) requires a different approach. The fraudsters are sophisticated, and their knowledge of how to hide their tracks requires at least an equal understanding in-house or the use of specialist vendors.
“It’s hard to know what you don’t know – keeping up with fraud trends, getting very familiar with your own data/signals, and acknowledging that you don’t know it all are key to keeping up with the bad guys. Avoiding complacency is the biggest challenge.”
Chargebacks911 – why AI is the hero and the enemy
It’s impossible to reflect on this year without mentioning AI, especially considering its increasing relevance in the fight against payments fraud. Financial institutions have been using AI for nearly a decade to protect consumers from fraud, as Roger Alexander, Key Advisor to Chargebacks911, explained in this interview.
Chargebacks911 has harnessed the technology to analyse vast amounts of customer data, identifying patterns that signal fraud. This can include everything from tracking multiple chargeback claims to analysing how quickly a customer types.
However, as AI becomes more mainstream, accessible and advanced, it has also been adopted by fraudsters, leading to an AI vs. AI battle reminiscent of a science fiction plot.
Alexander remarked: “The surge in investment we’ve seen in companies working in AI and their suppliers – NVIDIA for example – has been driven by interest in LLMs.
“As analysts are now saying, this technology has very limited use cases: it can create text and images, but little else. Unfortunately, one of the things that this technology is good at is creating convincing-looking text for fraud.
“AI can also be the answer to this: the kind of technology we use at present can look beyond whether text seems like it was written by a human being and make real judgments about what is and isn’t LLM-generated text being used to perpetrate fraud.”
Operators – collaboration is key
At the inaugural Payment Expert Summit in Lisbon, a panel of experts from operators and payment firms discussed their ongoing battle against fraud and reflected on the industry’s next steps.
A key theme that emerged during this session, and others throughout the year, was the importance of collaboration between companies – a tactic fraudsters have already mastered, often using social channels to communicate and strategise.
Julija Haragezova, Head of Account Development (iGaming) at Trustly, emphasised the need for more data sharing within the industry. She stated: “I think what we probably don’t do enough is sharing certain things and I think we definitely should do more.
“There is always a pushback from compliance teams about data sharing protection, and so on. But as far as I understand, there are ways of sharing more data and I think that’s where payment providers should step up and support operators.”
Experts warn that the battle is won but the fight isn’t over
Fraudsters often have an easier time working together, as demonstrated when the Payment Systems Regulator (PSR) introduced new reimbursement rules to combat rising levels of Authorised Push Payment (APP) fraud.
Initially, the regulations required that sending and receiving firms share the cost of APP fraud reimbursements equally, with the potential for transactions up to £415,000 to be reimbursed. This initiative was widely supported, as there was consensus that action was needed to address the growing issue of APP fraud. However, not everyone agreed with the conditions.
Under pressure from certain firms, which argued that the £415,000 threshold could incentivise fraudsters and financially cripple some businesses, the PSR reluctantly reduced the limit to £85,000.
Despite this adjustment, disagreements remained. Many experts questioned why social media platforms were not being held accountable, as they are a major source of fraud, with much of the fraudulent activity beginning on these platforms.
Marca Wosoba, COO at ZBD, shared her concerns with Payment Expert, stating: “Regulators and the sector should do more. An unintended consequence of this regulation is that it might encourage scammers, as they know they are unlikely to be caught, but consumers are likely to be reimbursed,” she continued.
“Coordinating to ensure that the latest scam tactics are widely known to the sector, consumers, and financial crime investigators across the EU and globally is essential to help mitigate future fraud and catch and prosecute fraudsters.
“Establishing a broader fund to support consumer education and fraud reduction through advanced procedures and information sharing is critical.
“Coordinating with social media sites, which are often the source of financial scams, but have far less incentive to reduce or address fraud compared to the fintech industry, which bears the regulatory and financial responsibility to prevent and rectify such incidents.”
