The Rising Threat of Generative AI Fraud
Why Identiq is the Missing Piece of the Fraud Prevention Puzzle
It’s been fantastic to be back at face-to-face conferences again, holding conversations with fraud fighters and payments professionals in person at last.
We’ve been particularly fortunate in being chosen to speak at many of the events we’ve attended, as well - from a panel with Plastiq’s Tal Yeshaov and Julie Fergerson at MRC Vegas, to a presentation with Emilio Lopez from Newegg at Marketplace Risk, a workshop with Asa Zaidman from Wix at MRC Berlin, and being chosen to present Identiq at MPE Berlin.
The question we’ve heard, from more people than we could possibly count by now, is: What makes you different? It’s a good question. So we decided to write it out. And the answer is: We provide the missing piece of the fraud prevention puzzle.
Identiq - The Customer Experience Complement to Your Fraud Fighting Tools
Chargebacks have always been - and still are - the primary KPI of most fraud prevention teams. The reason most companies realized the need for a fraud prevention team in the first place was, typically, the discovery that they were bleeding money through fraud chargebacks, and they needed that to stop. Over the years fraud fighters have become sophisticated and highly effective at identifying and mitigating fraud.
Fraud fighting teams focus on fighting fraud. It’s almost axiomatic. In philosophical terms, it sounds like what’s called an “analytic truth” - to say that A=A. But anyone from the industry knows that it’s not as simple as that.
There are two elements which make this simple picture far more complex.
- Customer Experience Impact. As fraud prevention efforts impact checkout so significantly, their role in the customer experience there has come under scrutiny. It’s no longer enough to prevent chargebacks. You have to do that and also maintain strong emphasis on minimizing false positives, minimizing friction for the customer, and minimizing delay caused by manual reviews.
- Protecting the Entire Customer Journey. Fraudsters used to be mostly focused on checkout (and causing chargebacks, in a sense) too. But they’ve branched out in recent years, and now attacks are common everywhere in the customer journey. 1 in every 5 account openings is malicious. ATO increased 148% in 2021 on a year-over-year basis - and 38% of consumers have experienced ATO in the past two years. Fraud prevention teams, in many companies, are now having to protect every touchpoint.
So fraud prevention has evolved, and fraud fighters have adapted to meet the new challenges. But most of the tools they use to help them in their work still reflect the original focus of the profession: primarily, they fight fraud. They look for bad actors. The focus, so to speak, is on the negative - bad actors, compromised cards and addresses and emails and IPs, signs that something suspicious is going on.
That makes sense. More than that, it’s essential, a vital perspective to help fraud fighters do their job well. But it’s incomplete.
Fraud management tools and systems do their best to take the need for balance into account, but it’s always an afterthought. Inevitably, the focus is on stopping fraud. It’s the job of other departments to focus on customer experience.
Yet, given the way in which fraud prevention has expanded in terms of both role and responsibility, it’s just as important for fraud teams to have tools which approach the problem from the opposite perspective, supporting the customer experience side of fraud teams’ work.
That’s exactly what Identiq does. It’s designed for fraud prevention teams, with their needs in mind, to serve the use cases they care about - including the ones which are an “add-on” or extra or afterthought for other solutions. Like promo abuse, friendly fraud, account creation etc. But it focuses first and foremost on good customers.
The Power of Positive Validation
Traditionally, fraud prevention looks for the fraudsters. Identiq takes the opposite approach. Wouldn’t it be easier for fraud fighters to do their jobs, if they could instantly and confidently identify most good users - who are, after all, the overwhelming majority of your customers?
So how do you identify good users? It’s simple. Other companies - other merchants, other marketplaces, other fintechs, etc. - already know and trust them.
Good customers have a rich, real presence online. They use a wide range of sites and apps, and they use the same email, phone number, device, etc. across those stores and platforms. So if the sites and apps work together, the trust is pooled. For example, it’s obvious when a user who’s new to one platform is already well-known to others (making signup validation and promo abuse protection easy, as well as invisible to users). No manual review required.
Fake, fraudulent or synthetic identities stand out straight away, since they don’t have that reliable, rich history across sites and time. Fraud fighters can spend their time on those cases, distinguishing between fraud and genuine examples of new users (e.g. young people just starting to use the internet regularly) and legitimate new credit cards, devices, addresses etc. These new elements, of course, only need validating a few times by companies on the network - and after that, the whole network will know to trust them too. No friction needed.
How it Works: Privacy Enhancing Technology
This level of collaboration sounds like an obvious answer to so many of the challenges fraud prevention teams face around customer experience, and minimizing the negative impact of fraud fighting on good customers. So the next question we usually get is - why hasn’t this happened before?
The answer is data. Companies are simply not willing to share personal customer data with competitors - for excellent legal, privacy and business reasons. Until recently, it simply wasn’t possible to collaborate on a data level like this without sharing data, as consortiums do. (This is why consortiums focus on “bad data” like compromised cards or fake emails rather than good customer information. No one cares about sharing fraudsters’ data.)
Identiq is different. Identiq’s network is built on Privacy Enhancing Technology - specifically, Multi-Party Computation - which enables companies to validate identity data against each other’s databases without sharing any PII. Not with each other, and not even with Identiq.
It’s sometimes called the providerless model; removing the third-party data provider from the middle of things, and instead connecting companies directly to leverage one another’s data - without sharing it. Identiq is the first to bring this concept to fraud prevention. It means you can validate even very sensitive pieces of data, such as credit card numbers - because the information never leaves your own system.
Remove Friction, and Find Your Focus
Companies using Identiq can make sure that their good users get a reliably great experience, removing friction and delay from their customer journey. With that taken care of, the fraud prevention team can focus on what they do best - identifying, analyzing and stopping fraud.
Want to find out more about how joining Identiq’s network could help your company, and your fraud team? We’d love to hear from you.
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