AI, passive authentication for frictionless commerce


The best fraud prevention happens in the background: stopping bad actors, quietly, while improving the customer experience.

Jason Paguandas, vice president of fraud prevention and strategy at Canadian payment services and value exchange provider Interac, told PYMNTS that artificial intelligence (AI) can lead to ” passive and dynamic authentication” in all business channels.

And while that sounds new and a bit futuristic, it turns out that the novelty in preventing payment fraud — at least in some ways — isn’t all that new.

As Paguandas noted, AI has been a tool in use for decades: 75% of acquiring banks already use AI in some form in their lines of defense against fraud. Each time a consumer uses their payment card, that transaction is assessed against various risk factors, in real time.

But as to what’s different: “What has changed lately is the diversity of data that organizations have access to, especially with some of the trends we’re seeing with the digitization of that data,” he said. -he declares.

This information can differentiate legitimate transactions from fraudulent transactions by looking at how and where the information is entered. There are hundreds of data points an organization can collect and analyze from historical behavior on an individual’s payment card and from their device, to see how a given consumer would “normally” behave as a as a customer, he said.

“AI allows all of this data to be processed in real time,” he said. And, he added, businesses would do well to use these advanced tools to combat fraudsters who, in turn, use their own AI-powered methods to implement their schemes.

Context, in these cases, is everything, he says.

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For example, a transaction made at 2 a.m., Montreal time, may seem suspicious. But not when the bank knows, thanks to geolocation, that the customer is on vacation in Tuscany. With the AI-derived idea that a device has been used in Florence, multiple times and in different locations, well… that changes the risk parameters significantly.

Of course, there are key considerations for financial institutions (FIs) and other businesses looking to take advantage of these benefits. They must partner with the right solution providers and maintain strict data protocols. Interac, he said, guarantees that the data (including personally identifiable location) does not leave Canada.

Smooth out friction

AI can also alleviate the sources of friction that have long been a sore point in e-commerce, especially since active authentication has always been the means by which companies have had to ensure that people are well who they claim to be when transacting. You know the drill: the alerts and heightened checks that end up interrupting the flow of omnichannel commerce.

Passive authentication simplifies these interactions, making payments intuitive (with a bit of added encryption).

“All the heavy data processing and heavy lifting happens in the background,” he said. And beyond the confines of financial institutions, he said, AI can prove a useful tool in the authentication and security of verticals such as consumer goods, shipping and transfers. of the supply chain.

No matter where the transaction takes place, seconds matter, Paguandas said, especially when it comes to onboarding new customers — and especially when switching costs for customers to switch from one product or another. a supplier are so weak.

More than ever, speed matters in online transactions and interactions, Paguandas said.

“These are the moments of truth between FIs, between merchants and customers,” he told PYMNTS.

See also: Data-driven decisions: why digitizing back-office payment technology needs to be on the agenda



On: PYMNTS’ survey of 2,094 consumers for The Tailored Shopping Experience report, a collaboration with Elastic Path, shows where merchants are succeeding and where they need to up their game to deliver a personalized shopping experience.

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