AI-centric technologies are revolutionizing the banking and payment sectors. This is being done by facilitating faster and more efficient transaction processing.
Recent coverage by Invezz indicates that the exploration of AI-enabled cloud computing solutions is underway. This could refine the process of securities selection, tailoring them to customer requirements.
However, it’s crucial to be aware that malicious activities in cyberspace are also escalating. Cybercriminals are increasingly leveraging sophisticated tools such as generative artificial intelligence to innovate their offensive strategies. Moreover, emerging AI tools such as ChatGPT are being regarded as a powerful asset by fraudulent actors aiming to engage in digital identity fraud.
This risk can be mitigated with the strategic management of data and leveraging AI capabilities proactively by merchants. This effectively counters the ill-intended utilization of such advanced technologies, ensuring a safe and secure digital environment for financial transactions.
A “Steroid Pill” for Fraud
Bad actors are maneuvering the digital payments sphere. In a recent dialogue with PYMNTS, Erika Dietrich, Head of Risk Services at ACI Worldwide, described emerging AI tools such as ChatGPT as a “steroid pill” for these fraudsters.
“Firstly, people can construct artificial email accounts and employ a range of AI-driven techniques and resources to not only extract data but also generate partial and fabricated identity characteristics,” she explained. “Secondly, these AI utilities simplify and exponentially enhance the capacity for criminals to generate bots for their attacks.”
Dietrich underscored the importance of consumers maintaining “adequate digital cleanliness.” She emphasized the need for businesses to put layered solutions in place to verify and authenticate any data being introduced into their systems.
In the current volatile fraud landscape, Dietrich suggested it is imperative for merchants and invoice issuers to explicitly define their communication methods with their customers. They should unambiguously communicate which is their preferred mode of engagement, and which is not.
Balance is Needed
It is vital for businesses and financial institutions to calibrate the equilibrium between user authentication and transaction friction. They must identify and implement points of resistance only when there are valid identity-related concerns. This will ensure a seamless customer journey without compromising trust.
This approach requires both an analytical procedure and a degree of finesse. Achieving the optimal balance is pivotal for the effective deployment of multi-layered security solutions.
The solution hinges on crafting precise customer profiles using historical data. This information should be factored into a strategy based on variables such as geographical location, payment preferences, and devices used for transactions. Accounts should be diligently monitored through artificial intelligence. Any issues can be escalated to human decision makers as necessary.
Human intervention will persist in roles such as data management and response coordination. As Dietrich maintains, “There will always be a human in the loop.”
Meeting AI Challenges Head-On
What insights can we glean from this discussion?
The overarching observation is that every technological innovation designed to streamline commerce and enhance security measures triggers a counter-response from fraudsters who aim to exploit these advancements for their own advantage. A few other notable takeaways regarding the utilization of “weaponized” AI in the banking sector include:
#1 | Evolution in Fraud Techniques
As AI and similar technologies become increasingly integral to payment systems, fraudsters are also adopting these tools to devise more advanced strategies. This includes the creation of synthetic identities and automated bots for wide-scale attacks.
#2 | Balancing Security With Customer Convenience
Enterprises must delicately balance the need for robust security measures with the necessity for a seamless customer experience. Overly intrusive security measures might dissuade potential clients, while lenient ones might expose clients — and consequently, the enterprise — to fraud.
#3 | Importance of Layered Defense Strategies
An in-depth, multilayered approach to anti-fraud and risk controls is crucial. This involves using historical data to develop customer profiles. Institutions must then formulate a strategy based on factors like preferred payment method, geographical location, and the specific device or account used.
#4 | The Vital Role of Human Intervention
Despite the growing influence of digital tools and AI in managing fraud risks, the human element is irreplaceable. Live human oversight functions as a critical overseer in data management and response coordination.
Getting Proactive About AI-Enabled Threats
These forward-thinking initiatives can improve and refine the overall cybersecurity framework of the banking and eCommerce sectors. Taking a proactive approach ensures that the industry maintains its resilience against potential future threats.
The question of AI-driven fraud is real and growing. However, financial institutions can leverage a blend of technology, well-devised strategies, and robust security measures. Doing this will ensure that they protect their businesses and customers against these threats.
