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PayPal Holdings Inc. announced early Tuesday the launch of an AI-powered fraud-detection system that provides PayPal and Venmo users real-time alerts before a payment is made. The new feature, available to PayPal and Venmo users globally, is intended to protect users from sending payments that are not eligible for refunds, such as those that respond to scams originating on social media, PayPal says.
Alerts are sent to PayPal or Venmo users prior to payment when a suspect transaction is detected. The alerts reflect the risk level of the transaction, and the warnings become progressively stronger as the app’s confidence increases that the potential transaction is a scam. Transactions deemed highly risky are automatically declined.
“As scammers attempt to coerce people into sending payments that may not be eligible for refunds, including scams that originate on social media, we believe putting more information directly into customers’ hands will empower them to help stop scams in their tracks,” PayPal says in a blog post on its Web site announcing the new feature.
PayPal’s new fraud-alert system leverages AI models capable of analyzing billions of data points and learning as fraud patterns change. These features give AI-based fraud-detection models an advantage over so-called static fraud-detection models that rely on predefined rules and established patterns to identify and prevent fraud, according to PayPal.
“This means our system can help more quickly detect a potential new scam, even if we have never seen that specific scam before,” says PayPal.
PayPal is positioning its dynamic fraud-alert system as part of its “multi-pronged” approach to fraud detection, which it says includes developing new technologies, leveraging investigative research, and refining risk controls to help prevent bad actors from accessing the payments company’s platforms. The new feature is also intended to enhance the user experience, PayPal adds.
“Given fraudsters frequently change their methods to try to evade detection, staying ahead of the latest trends and continually enhancing our tools are critical aspects of our efforts,” PayPal says.
