Q&A: AI is keeping the mobility and fuel retail sector safe from fraud
Digital Journal: As e-commerce booms globally and digital transactions become the norm, what are the evolving challenges and opportunities for retailers in combating fraud?
Jonathan Hancock: The rapid global expansion of e-commerce and digital transactions has undeniably revolutionized how we shop and pay for goods and services. However, it has also opened a pandora’s box of opportunity for fraudsters, demanding innovative solutions to combat ever-evolving threats.
I would say there are four fundamental realities that any fraud strategy needs to be keep in mind:
- Exponential Growth: The global e-commerce market is projected to reach $6.4 trillion by 2024, creating a fertile ground for fraudsters.
- Shifting Tactics: Fraudsters constantly adapt, moving beyond traditional methods, like stolen credit cards, to exploit weaknesses in new technologies, like mobile wallets and cryptocurrency.
- Globalization: Cross-border transactions and diverse payment methods introduce complexities, requiring adaptable fraud detection systems.
- Data Deluge: The sheer volume of transaction data demands advanced analytics capabilities to identify anomalies and suspicious patterns amidst the noise.
As a leading provider of fraud prevention and payments solutions, particularly to the mobility and fuel retail sector, we help our customers reduce the impact of fraudulent activities, including card cloning, card swapping, and skimming, as well as identifying and stopping fraud before it takes place. We are allowing them to focus on their core offering and leave transaction security to us.
DJ: What are some of the most disruptive emerging trends in fuel retail fraud that we can expect to see in the next year?
Hancock: Sustainability concerns are reshaping the fuel landscape, with electric vehicles (EVs) taking centre stage and demanding eco-friendly solutions. This surge in EVs fuels the need for more unmanned charging stations, attracting opportunistic fraudsters who exploit vulnerabilities in data collection methods and security protocols.
Meanwhile, convenience reigns supreme as mobile wallets continue their ascendancy in fleet management. While offering increased security and efficiency, these “tap-and-go.” methods haven’t banished fraud entirely, as they often interoperate with physical cards, creating additional vulnerabilities.
Despite the advancements in security, a concerning trend is on the rise: “Abuse of Genuine fraud.” This deceitful tactic, where someone claims legitimate transactions as fraudulent, is expected to grow in 2024. Identifying and mitigating this complex fraud type necessitates sophisticated AI-powered scoring systems and the ability to analyse industry-specific data with laser-sharp precision.
Further complicating matters is the issue of overclaiming and opportunistic fraud. Sometimes, even honest customers can mistakenly report legitimate transactions as fraudulent, artificially inflating fraud values by as much as 45 percent. That impacts the bottom line, disrupts business strategies, and throws AI scoring systems off balance. To combat these issues, pinpointing the point of compromise and differentiating genuine behaviour from fraudulent activities becomes paramount.
DJ: Based on The ai Corporation’s global reach across banks, merchants, and consumers, can you identify any specific regions or sectors where you anticipate a rise in retail fraud in the coming months?
Hancock: We must recognize the security of EV charging stations. These critical infrastructure hubs, both virtual and physical, are susceptible to cyberattacks. The industry must take proactive measures like implementing robust security protocols, patching systems regularly, and educating users about potential scams to avoid falling victim.
In addition, we will be monitoring the following regions and markets:
- Emerging Markets: Rapid digital adoption with less mature fraud prevention infrastructure makes these regions vulnerable. The ai Corporation can offer expertise and scalable solutions to bridge the gap.
- Small and Medium-Sized Businesses (SMBs): SMBs lack resources and expertise, so they are attractive targets. Affordable, user-friendly AI-powered solutions can empower them.
- High-Value Sectors: E-commerce, travel, and luxury goods experience higher fraud rates due to their digital nature and high-value transactions. Industry-specific AI models trained on relevant data can provide an effective defence.
DJ: How does your team leverage AI and machine learning to stay ahead of evolving retail fraud tactics and how do you see these technologies helping to combat emerging fraud trends?
Hancock: We enhance several merchants and retailers’ fraud detection and prevention capabilities by combining our unique, cutting-edge Autopilot Machine Learning (APML) technology, which automates the optimisation of its anti-fraud systems, with our aiRiskNet® fraud management platform, and our team of managed service expert analysts.
There is no doubt in our minds that these tools will continue to play a vital role in effective fraud strategies and provide the following advantages:
- Real-time Threat Detection: Our AI models continuously analyse data, identifying anomalies and suspicious patterns in real-time to prevent fraudulent transactions before they occur.
- Adaptive Learning: Our algorithms constantly learn from new attacks, automatically adapting to evolving tactics and staying ahead of emerging threats.
- Advanced Analytics: We employ various techniques to uncover hidden connections and complex fraud schemes, including network analysis and anomaly detection.
- Explainable AI: We prioritize transparency, providing explainable AI models that help analysts understand the rationale behind fraud detections, facilitating informed decision-making.
DJ: As retail fraud tactics evolve alongside e-commerce growth, what are the most critical challenges merchants and financial institutions face in mitigating this growing threat? What innovative strategies or solutions can be implemented to effectively address these challenges?
Hancock: With the rise of sustainable fuels and unmanned stations, fraudsters are finding new ways to exploit vulnerabilities. Our experts stay ahead of the curve, identifying these risks and developing solutions. We leverage strong relationships with fuel retailers to gather additional data beyond payments, helping us pinpoint suspicious activity at unmanned stations, like fake QR code scams.
Mobile wallets offer convenience, but security remains paramount. We understand that the balance is crucial. By analysing user behaviour with sector-specific data (like fleet odometer readings), we create detailed profiles for both vehicles and payment methods. This helps identify “abuse of genuine” fraud, where stolen credentials are used for extended periods. Combining these methods allows us to quickly detect unusual spending patterns and mitigate fraud, all while ensuring a smooth user experience.
