Diving brief:
- Artificial intelligence is now sophisticated enough that malicious actors can use it, after taking over a consumer’s account, to simulate that person’s behavior.creating another point of frustration for payment companies battling fraud, fintech professionals said.
- Advanced AI programs are now able to mimic the behavior of a real person, allowing fraudsters to evade financial institutions’ surveillance for unusual activity, panelists said at the annual Money 20 conference /20 in Las Vegas on Monday.
- “The ability to just create a model and create 10,000 people that look real has become much greater,” said Brian Dammeir, head of payments for San Francisco-based financial services company Plaid.
Dive overview:
Fraud is on the rise. Americans lost $10.2 billion to fraud in 2023, a 14% increase in reported losses compared to 2022, according to the Federal Trade Commission. And the fraudsters are helped in large part by advanced technology, according to the international police organization Interpol.
Financial institutions spot account takeovers – when a hacker takes over a consumer’s credit card or checking account and makes purchases or withdraws money – by monitoring consumer behavior, Dammeir said.
If a consumer’s spending habits change drastically, that’s a clue their account has been hacked, he said.
“What does each transaction look like? » said Dammeir. “What does this user look like?” Does this match other behaviors I have already observed in them? »
A hacker who can train an AI model to transact like a real person can better evade these safeguards, he said.
Partnerships between financial institutions are another way to combat fraudsters using more sophisticated tools, said Nicole Lauredan, head of partnerships for payment processing software company Stripe.
The company improved transmitter networkwhich launched last year, helps financial institutions share their fraud-fighting tools and helps participants exchange data on fraudulent transactions, she said.
“Card issuers like Capital One and Discover are leveraging this data to be able to actually improve their own machine learning,” Lauredan said.
The panelists did not provide any specific cases of artificial intelligence helping fraudsters, but said financial institutions need to prepare for it.
Bernadette Ksepkadeputy head of product management at the Federal Reserve Bank of Boston, stressed the need to implement several anti-fraud controls.
The Fed is working on tools that banks can use to spot abnormal transactions and help consumers and merchants confirm transactions, she said.
“Ultimately, I think it will take a tiered approach to safeguarding” Ksepka said.
