The fight against fraud has always been a messy business, but it’s especially grisly in the digital age. To keep ahead of the cybercriminals, investment in technology – particularly artificial intelligence – is paramount, says Ajay Bhalla, president of cyber and intelligence solutions at Mastercard.
Since the opening salvo of the coronavirus crisis, cybercriminals have launched increasingly sophisticated attacks across a multitude of channels, taking advantage of heightened emotions and poor online security.
Some £1.26 billion was lost to financial fraud in the UK in 2020, according to UK Finance, a trade association, while there was a 43% year-on-year explosion in internet banking fraud losses. The banking industry managed to stop some £1.6 billion of fraud over the course of the year, equivalent to £6.73 in every £10 of attempted fraud.
The landscape has rapidly evolved over the past year, says Bhalla, due to factors like the rapid growth of online shopping and the emergence of digital solutions in the banking sector and beyond. These changes have broken down the barriers to innovation, driving an unprecedented pace of change in the way we pay, bank and shop, says the executive, who’s responsible for deploying innovative technology to ensure the safety and security of 90 billion transactions every year.
“Against that backdrop, cybercrime is a $5.2 trillion annual problem that must be met head-on. Standing still will mean effectively going backwards, as fraudsters are increasingly persistent, agile and well-funded.”
AI: the new electricity
It isn’t just the growing number of transactions that attracts criminal attention, but the diversity of opportunity, according to London-based Bhalla, who has held various roles at Mastercard around the world since 1993.
“As the Internet of Things becomes ever more pervasive, so the size of the attack surface grows,” he says, noting that there will be 50 billion connected devices by 2025.
Against this backdrop, AI will be essential to tackle cyber threats.
“AI is fundamental to our work in areas such as identity and ecommerce, and we think of it as the new electricity, powering our society and driving forward progress,” says the 55-year-old.
Mastercard has pioneered the use of AI in banking through its worldwide network of R&D labs and AI innovation centres, and its AI-powered solutions have saved more than $30bn being lost to fraud over the past two years.
In 2020, it opened an Intelligence and Cyber Centre in Vancouver, aimed at accelerating innovation in AI and IoT. The company filed at least 40 AI-related patent applications last year; it has developed the biggest cyber risk assessment capability on the planet, according to Bhalla.
“We are constantly testing, adapting and improving algorithms to solve real-world challenges.”
Turning to examples of the company’s work, Bhalla says Mastercard has built an ability to trace and alert on financial crime across its network, a world first. He also points to the recently launched Enhanced Contactless, or ECOS, which leverages state-of-the-art security and privacy technology to make contactless payments resistant to attacks from quantum computers, using next-generation algorithms and cryptography.
“With ECOS, contactless payments still happen in less than half a second, but they are three million times harder to break.”
Building security through biometrics
Such innovations are transforming customers’ interactions with financial services providers. For example, Mastercard has combined AI-powered technologies with physical biometrics – like face, fingerprint and palm – to identify legitimate account holders. These technologies recognise behavioural traits, like the way in which customers hold their phone or how fast they type, actions that can’t be replicated by fraudsters.
“We see a future where biometrics don’t just authenticate a payment; they are the payment, with consumers simply waving to pay.”
Excited by developments in this area, Bhalla says Mastercard recently detected an attack that involved hundreds of devices attempting to log in from a phone that had reported itself as lying flat on its back. “Given the speed at which the credentials were typed, we knew it was unlikely it could be done with the phone flat on a surface,” Bhalla says. “In this way, a sophisticated attack that looked otherwise legitimate was detected before any fraud losses could occur.”
Mastercard might boast an impressive list of successful fraud-fighting solutions, but wrong turns are vital for the journey, Bhalla admits. “If you don’t test things to break them, you can be sure their vulnerabilities will be discovered down the line,” he says. “At Mastercard, trust in and reliance on our services is far too important to take that risk, so rigorously testing solutions before they get anywhere near the end user is our standard operating procedure.”
Trust is a must
A keen rower and golfer, Bhalla volunteers as an executive-in-residence at the University of Oxford’s Saïd Business School. He has a bachelor’s degree in commerce from Delhi University and a master’s degree in management from the University of Mumbai.
Even with his experience and tech knowledge, Bhalla insists that Mastercard and others within the industry must go back to basics and focus on customer experience. The company’s leadership in standards has been core to earning and retaining the trust of its customers, he notes.
The technology may be evolving quickly, but one core principle remains, says Bhalla.
“Our business is based on trust, which is hard-won and easily lost.”
The correct operating processes and standards must be in place from the outset so that both customers and businesses can have confidence in the technology and trust that it will be useful, safe and secure.
“What has changed is the sharp focus now placed on developing leading-edge solutions that prevent fraud and manage its impact, which is not surprising given that the average cost of a single data breach has now grown to $3.86 million,” Bhalla says.
Providing a blueprint for business leaders, Bhalla strongly believes that “innovation must be good for people … and address their needs at the fundamental design stage of the systems and solutions we create.”
Bhalla is using tech to fight fraud and drive financial inclusion, with Mastercard aiming to connect 1 billion people globally to the digital economy by 2025. His ambitions are wider still, with much of his work focused on “protecting the world we have”.
Mindful that climate change is high on the agenda, especially for younger generations, Mastercard has launched a raft of programmes in the area, including this year’s Sustainable Card Badge, which looks to identify cards made more sustainably from recyclable, recycled, bio-sourced, chlorine-free, degradable or ocean plastics.
Much like fighting fraud, global warming is reaching a crucial stage. Thanks to the efforts of industry leaders like Bhalla, the world stands a better chance of ultimate triumph on both fronts.