Visa Is Combatting Fraud at Nearly the Speed of Light

PaymentsJournal, Using Artificial Intelligence, Visa Is Combatting Fraud at Nearly the Speed of Light, June 17, 2019

By using artificial intelligence (AI), Visa Inc. helped issuers prevent an estimated $25 billion in annual fraud, the company announced on June 17. The company accomplished this using Visa Advanced Authorization (VAA), a comprehensive risk management tool that monitors transaction authorization on the Visa global network, VisaNet, in real time. 

VAA evaluates every single transaction on VisaNet and helps issuers swiftly identify emerging fraud trends and patterns, allowing the issuers to respond promptly to instances of fraud, while approving legitimate transactions. 

“One of the toughest challenges in payments is separating good transactions made by cardholders from bad ones attempted by fraudsters without adding friction to the process,” said Melissa McSherry, senior vice president and global head of Data Products and Solutions at Visa. 

Speed is Key 

The speed with which Visa can evaluate a transaction is crucial. 

If the process is too slow (if there’s too much friction) and a payment is falsely declined, the affected cardholder is likely to just use a secondary payment card to complete the transaction, potentially a card issued by a competitor. In fact, 51 percent of cardholders who experienced a false decline simply used another card, according to a study. 

Therefore, Visa Advanced Authorization is strikingly quick, with each transaction being assessed in about one millisecond. In that millisecond, the AI searches for indicators of fraud — looking for activities and patterns common in fraudulent transactions. Put another way, Visa’s technology allows financial institutions to approve legitimate purchases, and prevent fraudulent ones, at nearly the speed of light. 

How It Works 

Visa Advanced Authorization starts the moment a transaction is initiated by a merchant. As the hundreds of pieces of data from the transaction are sent over VisaNet, an artificial intelligence model analyzes the data for more than 500 unique risk attributes. These attributes can be thought of as clues that fraud may have occurred. 

For example, the AI will look at what type of transaction it is, whether it’s being made in a store or online, with a contactless card or with a chip card. The AI will also determine whether the account associated with the card has been used at that store before. Even the time of day or the amount of money involved is considered by the algorithm. Advanced Authorization is robust enough that it can identify good transactions even when they are made by a new or infrequent shopper, which further helps reduce the rates of false declines. 

After completing this analysis, the Advanced Authorization system will then generate a score which reflects the likelihood that the transaction is fraudulent. The scores range from 1 to 99, with 1 being the least risky and 99 the most risky.... 

The Size of the Problem 

While each transaction can be assessed in a short amount of time, the amount of transactions in need of assessment have been skyrocketing. Over the past two decades, Visa’s transaction volume has increased by more than 1,000 percent; VisaNet processed more than 127 billion transactions in 2018 alone....

“Visa was the first payment network to apply neural network-based AI in 1993 to analyze the riskiness of transactions in real time, and the impact on fraud was immediate,” said McSherry. Prior to using cutting-edge technology, fraud detection was analog and consequently cumbersome. 

For every transaction, for example, a cashier would have to search through a voluminous book of stolen cardholder account numbers to confirm that the card was not stolen. Another method consisted of the cashier dialing up a call center representative to verbally authorize the card. In either case, the process was slow.