Fighting Fraud is Now More Important than Ever Due to COVID
We are in a new era when it comes to fraud, and it goes without saying that businesses should have systems in place to provide protection from fraud. It is commonly understood that businesses are even more vulnerable to fraud than individuals are, and fraud today is much more difficult to detect. As Forbes Magazine states, “Rule-based engines and simple predictive models could identify the majority of fraud attempts in the past, yet they aren’t keeping up with the scale and severity of fraud attempts today. Fraud attempts and breaches are more nuanced, with organized crime and state-sponsored groups using machine learning algorithms to find new ways to defraud digital businesses. Fraud-based attacks have a completely different pattern, sequence, and structure, which make them undetectable using rules-based logic and predictive models alone.” During a global pandemic such as the one we are currently experiencing, fraud can be even more prevalent and insidious. We are currently living in a time when we need to be even more vigilant than ever before to protect our businesses against fraudulent activity.
In an article for The Paypers, WEX’s Ryan Taylor, Global VP of Corporate Payments Product Development, addresses the uptick in fraud during COVID-19. He then provides insight into how AI can mitigate fraud. Taylor notes that “card fraud, in particular, is forcing issuers and merchants to rethink their protective measures as the pandemic deepens.” As if we all didn’t have enough on our minds during this time of global crisis, Taylor goes on to point out that “in a single week during the pandemic (13-19 April), hackers attacked businesses more than 22 million times globally. All told, more than a quarter of all transactions during the COVID-19 crisis have been fraud and abuse attempts— representing a 20% increase over the previous quarter.”
One way to stay ahead of fraud and protect your company from nefarious actors in cyberspace is the use of artificial intelligence. Companies that have implemented AI tools are going to have a better time staying ahead of destructive activity perpetrated online. As Taylor explains it, the tool “quickly alerts analysts to anomalies, develops trend-based insights and discerns if a given transaction or series of financial activities are unusual or fraudulent. By applying machine learning, companies can mine historical and live data to locate patterns within customers’ behavior and can then evaluate every transaction to make accurate fraud predictions. The more data that’s collected across historical transactions, the better the precision in fraud detection.” An example of this Taylor cites in the Paypers article is recent scams involving Personal Protective Equipment (PPEs). The beauty of AI is its ability to recognize a pattern like this and develop systems to root out these types of repeated fraudulent and predatory transactions.
So what are the ways businesses can implement programs in addition to AI to fight fraud? One avenue Taylor discusses is using virtual cards for business transactions. According to Taylor, the way it works is, “single-use virtual cards typically have tight controls associated with them, such as the amount (which can be a range of amounts or one specific amount), expiration date, merchant, and even Merchant Category Codes, among other parameters. With regard to amounts, single-use virtual cards can be authorized to use with one exact amount only (such as USD 100), or they can be authorized for multiple transactions that ultimately result in that one exact amount (such as five USD 20 transactions).” When a company uses virtual cards as their form of payment transactions they become nearly immune to fraudulent behavior.
In an article in the Washington Post about virtual credit cards, it was described this way, “While microchips in credit cards have sharply reduced fraud in transactions that take place in stores, mobile and online transactions have become the low-hanging fruit of criminal opportunity.” As Taylor outlines in the Paypers article, “Uniquely valuable in B2B contexts, virtual cards have the ability to significantly reduce the risk of fraud.”
Both AI and virtual cards are tools companies can use to mitigate fraud during these more vulnerable times. Maintaining vigilance, putting practices into place, and adding resources towards fraud-prevention tools will help keep your business above the fray.