Data security and consumer protection are critical to building trust in the digital economy. What happens now that generative AI has come into play?
When it comes to digital payments, it is important to recognize the need for a delicate balance between customer experience and security.
Meanwhile, generative AI can be wielded by both bad actors and the good guys to meet their own purposes; how can good overcome evil in this case?
On the heels of the reopening of the Visa Innovation Center Singapore, DigiconAsia caught up with Prateek Sanghi, Head of Visa Consulting and Analytics, Asia Pacific on the topic of generative AI and payment fraud in the Asia Pacific region.
What are some key implications of the pervasive adoption of generative AI on data security and consumer protection?
Prateek Sanghi (PS): Generative AI, while presenting exciting opportunities, also introduces significant risks to the payments eco-system, particularly concerning data security and consumer protection. In Southeast Asia, the fastest-growing digital economy in the Asia Pacific, the use of biometrics and digital identities with AI for secure online payment authentication is increasingly prevalent. However, this has led to new forms of cyber fraud threats.
For instance, the rise of sophisticated deep fakes, which can convincingly mimic legitimate users, poses a challenge in verifying identities. Cyber phishing, often facilitated by these deep fakes, remains a critical concern as fraudsters extract sensitive information, reinforcing the need for robust security measures.
Moreover, a study by Nvidia shows that while 37% of financial services companies plan to use AI for competitive advantage, malevolent actors are also using AI-generated content, such as text, images, and profiles, to target businesses and consumers. The automation of these scams enables large-scale, rapid attacks, further emphasizing the need for effective safeguards against data breaches.
Therefore, while generative AI can enhance the payments landscape, it’s crucial to address these security challenges to ensure a safe and secure digital environment.
Broadly speaking, how is AI helping in the battle against payment fraud?
PS: AI plays a pivotal role in combating payment fraud by enhancing the efficacy of fraud prevention and detection controls. It scrutinizes historical fraudulent transaction data to discern patterns and coupled with predictive risk scoring models enables timely detection of suspicious activity. This is particularly effective in countering the dynamically evolving fraud modus operandis.
Additionally, AI excels in detecting anomalies within large datasets by comparing and contrasting them with normal transaction patterns, thereby isolating incongruous behavior as red flags to detect potential frauds.
The use of AI over the last decade has been instrumental in fortifying data security and enhancing protection for our clients. By analyzing patterns in past fraudulent transactions, AI technology can identify suspicious activities in real-time, providing a robust countermeasure against evolving fraud tactics, protecting both businesses and consumers who choose to transact on the Visa rails.
As an example, over the last decade, Visa has invested over US$3 billion in AI and data infrastructure to facilitate safer, smarter transactions. Our most recent innovation is the Visa Provisioning Intelligence (VPI), a tool that uses machine learning to rate individual transactions based on their potential fraudulence.
Additionally, AI-powered data centers monitor thousands of transactions every second across numerous countries/territories, effectively combating hackers and fraudsters, and preventing significant potential fraud daily. For instance, Visa’s AI-powered data centers monitor 76,000 transactions per second across more than 200 countries and territories, effectively countering hackers and fraudsters. Between October and December 2023, we observed an 11% increase in thwarted fraud attempts, primarily in e-commerce, preventing US$100 million in potential fraud daily.
The Visa Advanced Authorization (VAA), which prevented US$26 billion in fraud in 2021 alone, is powered by AI and machine learning. It analyzes up to 500 risk factors within 300 milliseconds per transaction, significantly enhancing the speed, efficiency, and accuracy of fraud detection.
In summary, a combination of advanced AI/ML techniques and the Power of Data stand out as the most powerful and efficacious mitigant to protect financial institutions and their customers from existing, emergent and horizon threats.
How can businesses practically apply generative AI in their digital payments solutions to gain a competitive edge in the dynamic payments landscape?
PS: Businesses can practically apply generative AI in their digital payments solutions in various ways to gain a competitive edge in the dynamic payments landscape.
By collaborating with a partner like Visa, businesses can tap on the power of AI to enhance fraud detection and prevention. By analyzing past fraudulent transaction data, AI can discern patterns and identify suspicious activities in real-time, thereby countering evolving fraud tactics. AI also excels in detecting anomalies in large datasets by contrasting them with normal transaction patterns, raising red flags for potential fraud.
Beyond fraud management, incorporating AI brings benefits to improving business operations and customer experiences. Businesses can use generative AI to personalize customer experiences by analyzing customer behavior and transaction data to deliver tailored recommendations and services, thereby improving customer satisfaction and loyalty.
Generative AI can also be used to automate routine tasks and streamline payment processes thereby reducing operational costs, allowing businesses to focus on growth and strategic initiatives.
Lastly, generative AI can provide valuable insights into customer behavior and market trends. These insights can inform strategic decisions, helping businesses to stay ahead of the competition.
How is Visa leveraging generative AI to enhance payment processes and services for businesses? Is the new Innovation Center contributing to this?
PS: Visa has been a pioneer in AI applications in payment since 1993. Our Visa Consulting and Analytics team comprises a global network of over 1,000 consultants, data scientists, and industry experts, and our AI advisory practice support businesses in navigating the AI landscape and maximizing the potential of generative AI for their process and services.
We have also established the $100M GenAI Fund, aimed at supporting generative AI companies creating new possibilities in commerce, payments, and fintech. This fund hopes to not only serve as a catalyst to propel the growth of generative AI in the payments landscape, but also open up new opportunities for Visa to enhance its own capabilities and maintain its competitive edge.
The transformative power of AI in the payment landscape can be experienced first-hand at Visa’s revamped Innovation Center. The new center will demonstrate how AI is used to reshape retail and business payment experiences, with demos that showcase the efficiencies, personalization and enhanced decision-making capabilities that AI enables.
Above all, fraud prevention is an entire ecosystem’s responsibility. Together with consumers, businesses, clients, partners and regulators, Visa continues double down on our commitment to innovation and security, with a mandate to improve customer experience and boost consumer and business confidence through fraud mitigation and security amid AI driven transformation.
