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The benefits of using artificial intelligence in payment fraud detection: A case study

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This paper presents a case study on the use of advanced artificial intelligence (AI) for the detection of payments fraud. The process applies AI within a typical online payment environment to detect fraudulent transactions in real time. The design focuses on an effective supervised learning engine with a data analytics component to support high-performance fraud detection, improving the predictive value of the original data. The design exploits the discriminant properties of customer data by finding hidden patterns. This feature significantly improves fraud detection rate and performance stability compared with a rule-based solution. The developed solution, based on an advanced AI-based technology and platform increased fraud detection rate from 85 per cent to 90 per cent (in terms of number of transaction records) and to 95 per cent in related amount volume (in terms of transaction value), while the alert rate (the percentage of daily transactions investigated manually) was reduced from 40 per cent to 10 per cent. The solution falls under the category of explainable AI because it can explain the rationale behind the decisions.
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Keywords: artificial intelligence; explainable AI; fraud management; machine learning; real-time fraud detection

Document Type: Research Article

Publication date: July 1, 2018

More about this publication?
  • Journal of Payments Strategy & Systems publishes peer-reviewed articles and case studies analysing best practice, emerging issues and new thinking in how to develop a profitable, customer-focused payments strategy. It examines major issues facing the corporate, wholesale and retail payments industry from a business, risk and operational perspective.

    Edited by renowned payments expert Alec Nacamuli and guided by an eminent Editorial Board, each quarterly 100-page issue provides practical, detailed analysis of developments and trends in the payments business, regulation, new entrants and technologies and how to bring them all together to define your payments strategy, as well as actionable advice and ‘lessons learned’ from fellow professionals on how payment processing systems can be leveraged to maximise profitability, security and efficiency and minimise risk. It contains no advertising and no advertorial.

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