How has the payments system evolved since the start of the pandemic?
JK: The pandemic accelerated the growth of online payments. We have seen a profusion of businesses setting up their first ever ecommerce or digital operations. The issue is that merchants are in the dark about these new online customers. They don’t know who the person is behind the computer, and they don’t know what their intent is. If someone buys 10 iPads in one go, are they a business, an individual with a lot of tech-obsessed kids or a fraudster? If they came into your store regularly, you would talk to them and develop a relationship. So, without that, we need to develop actionable digital relationships instead.
AS: Customers who previously went into a store have now adapted to sitting at home using their smartphones to buy goods and services with credit cards, crypto or buy now pay later services. This growth has meant more digital and contactless payments, as well as QR codes and PayLinks. We are also seeing more touchless payments, in particular restaurants and leisure facilities ditching chip and pin machines and moving to mobile technologies such as apps.
What are the main challenges resulting from this growth?
JK: It has put a significantly greater onus on ensuring secure digital payments. As transaction numbers have increased, so has the amount of fraud, with people using stolen cards, details they have secured from the black market or taking over loyalty accounts and banking the reward points.
We’re also seeing more chargeback fraud, misleadingly known as “friendly fraud”. At the end of the month, if you look at your credit card bill and see a payment that you don’t recognise, you query the transaction and ask for a chargeback. It could be that you’ve forgotten but people also use this to make fraudulent refund claims.
AS: Merchants are also increasingly under pressure to produce frictionless customer payment journeys to compete against the likes of Amazon. We have all been frustrated putting in card details and then seeing the payment screen whirring, only to be met with a decline message. Neither genuine customers nor honest merchants want these “false negatives” querying and even condemning their identity.
How is artificial intelligence (AI) technology helping to prevent fraud and develop digital identities?
JK: Using our technology, we harvest consensual customer data. Anywhere that customers digitally interact with a business, through a mobile app or website, feeds our machine learning and behavioural analytics technology to profile their digital identity. We combine our data with that of our parent company, Equifax, to perform a real-time analysis as to whether the customer trying to make an online transaction is a good actor. We also do real-time post-authorisation checks to counter chargeback fraud. These frictionless processes are equally effective online; cardholder present; crypto-based; cross-jurisdictional; or local payment variants.
Our AI fraud mitigation is a unique transaction dead end for the 1% of fraudsters who prey on genuine traders, and a major stride forward for honest trade.
What benefits have you seen from the Kount and Cardstream partnership?
AS: Cardstream’s Open Payment Network is a unique constellation of diverse merchant service providers and ancillary payment methods. Fraud mitigation is a top priority for our channel partners and their merchant clients. Fraudsters will always exist but adding the Kount technology has provided a massive barrier against that threat. AI and machine learning has been pivotal in helping our partners to mitigate fraud end to end without frustrating holdups – known as checkout friction. Real-time decisions on a transaction’s probity are being made in milliseconds.
Where do you see the payments sector moving in the foreseeable future?
JK: There will be more of a blend between payments and digital identity. Merchants will want to find more ways to help customers pay quickly and with less friction. That will be helped by knowing more about the customer and creating a personalised experience. If I am a keen fly fisherman and visit a sports website, I don’t want to see pages of products for deep sea fishing. If I can be directed straight away to products that I need, then I will pay more quickly, and the merchants will do more business.
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