Online fraud continues to grow.


There’s a lot of debate about what Artificial Intelligence really means, and how we should feel about it. Will it transform our world for the better? Will the machines take over? Will it simply make processes we already perform faster and smoother? As Gartner says in “A Framework for Applying AI in the Enterprise,” “The artificial intelligence acronym ‘AI’ might more appropriately stand for ‘amazing innovations’ that do what we thought technology couldn’t do.”

One way and another, we’re talking about “smart machines” — machines that are trained on existing, historical data, and use that to make accurate deductions or predictions about examples with which they’re presented. The applications are wide-ranging, from medicine to retail to self-driving cars and beyond.

For e-commerce, AI means the ability to deliver capabilities that simply were not possible before. There are two main directions in which this expresses itself:

1) Uncovering trends and audiences: A well-trained e-commerce AI can identify trends of buyer behavior, or interests in new products or experiences and adapt quickly.

2) Personalization: The experience can be tailored to each customer in ways that were not an option when companies had to configure/design the experience for everyone at once (or maybe have a few versions based on geographies). Customers can be offered the information and products they want, when they want them, in the ways that are best suited to them.

Why I’ve Come to Love AI

As someone who travels a lot, I often have a fairly complex customer story when I shop online. I might be on a work trip to China, using a proxy to shop on a favorite U.S. store with my credit card, which has a New York billing address, sending something to an office in San Francisco to pick up on my next stop. There’s a good chance I’ll be on a mobile device, and since I like to explore new things, I’m often buying something of a kind I’ve never bought before.

All of this makes me unpopular with e-commerce fraud prevention systems. I’ve lost count of the number of times I’ve been rejected, or delayed for days while my order is painstakingly reviewed. Sometimes I’ve moved on by the time the package finally arrives at the place to which I had ordered it.

The thing is, I get it. I was a fraud prevention analyst myself, back in the time before AI was an option. I know exactly how hard these transactions are to get right, from the human perspective. I know how long it can take to review a transaction, and that as an analyst the tendency is always to play it safe — even if that means sending a good customer away.

AI isn’t a magic tool, but properly leveraging AI can enable retailers to eat the cake — driving their sales upward by creating frictionless, speedy buying experiences for consumers — and have it, too — be completely protected against online payment fraud.

The 3 Unmatched Advantages of AI-based Fraud Protection Systems

Scale: An AI system can “look” at 6,000 data points in every transaction, and match them with billions of other transactions to look for patterns, discrepancies, and simple coincidences of events in just a fraction of a second. This means that all fraud decisions can happen 100 percent in real-time, regardless of how much traffic the site is receiving, or whether the fraud team is down with the flu.

Accuracy: In the last year a well-built and trained fraud protection AI has proven repeatedly that it outperforms even the best human reviewers in accuracy. For retailers the reduction in false declines (good customers mistakenly rejected as fraud) means more sales, and happier consumers, and the reduction in fraud chargebacks means lower costs, and lower risk. Beyond that, it enables new business models that were previously considered too risky, like the growing popularity of the try-and-buy model.

Adaptivity: In fraud prevention, one of the great challenges is the speed of learning necessary in order to deal with new fraudulent moda operandi. If a fraudster finds a new technique that works, it will spread like wildfire and hundreds of fraudsters will attack thousands of retailers at once. An AI-based solution is the only realistic way for retailers to fight fraud together in this highly dynamic environment, combining their efforts and sharing data in a centralized way to prevent fraudsters from abusing one retailer after another. In fact, AI has the potential to actually reverse the asymmetry and push the fraudsters back. From the criminal point of view, if a new method to defraud is blocked almost immediately after it is first conceived and tried out, it isn’t worth investing in.

AI is the future of e-commerce fraud prevention. It brings scale, accuracy and adaptivity to improve customer experience, block fraud and increase sales. Some retailers have already started leveraging AI, and they’re gaining a competitive advantage in this highly competitive field. Better fraud prevention is about to become standard. No site can afford to get left behind.

Michael Reitblat is chief executive officer of Forter.

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