With consumers—and criminals—flocking to e-commerce, card issuers and merchants are not only experiencing a significant increase in fraud, but also in so-called friendly fraud committed by cardholders who dispute legitimate purchases after the fact. As a result, merchants’ need for stronger cardholder verification tools is growing.
To address that need, Mastercard Inc. announced Monday it has partnered with Microsoft Corp. to enhance its Digital Transaction Insights identity-verification solution by integrating Microsoft’s Dynamics 365 Fraud Protection application. The application leverages adaptive artificial intelligence to assist in real-time fraud detection by identifying risky behaviors across purchases, cardholder accounts, and in-store activities. The integration will enable real-time intelligence sharing to help card issuers improve authorizations and reduce friendly fraud, which Mastercard estimates costs the card industry $50 billion annually worldwide. The rollout, which will take place in phases, will begin next year.
“Digital Fraud Protection can detect anomalous transaction fraud patterns through its machine-learning model,” a Microsoft spokesperson says by email. “By being able to identify authentic purchases and increase acceptance rates, customers will be less likely to have their purchases declined and merchants will be less likely to lose revenue due to false declines.”
Improving the authorization process will also help issuers improve acceptance rates on e-commerce transactions by reducing the friction at checkout that leads to cart abandonment, the two companies say. The need for this is becoming imperative, experts say, as 70% of online shopping carts are abandoned, according to the Baymard Institute. Pilots of Mastercard’s enhanced verification solution have shown the potential for significant reduction in both false-positive declines and fraud losses (both first- and third-party fraud), the network says.
Mastercard’s Digital Transaction Insights solution pairs insights into cardholder behavior gained through the Mastercard network with a merchant’s own data to confirm the customer’s identity and provide card issuers with the additional intelligence needed to optimize authorization decisions and approve more genuine transactions. Digital Transaction Insights is used across a wide range of online checkout scenarios, including click-to-pay and wearables to digital wallets and in-app purchases.
“Shopping online should be simple, quick, and secure. But that isn’t always the case,” Ajay Bhalla, president for cyber and intelligence for Mastercard, says in a prepared statement. “We’re committed to developing advanced identity and fraud technology to help enhance the real-time intelligence we provide to financial institutions around the globe.”
The collaboration between Mastercard and Microsoft is not the first such tie between the two companies. Mastercard Labs, for example, uses Microsoft Azure and artificial intelligence to accelerate its cloud-native research and development activities.
“Through years of successful partnership, Microsoft is already an integral part of Mastercard’s organization,” the Microsoft spokesperson says.