Two’s company, three’s essential when it comes to fraud
Written by Dr Mike Alford, CEO,Alaric International.
EMV Chip&PIN at the Point of Sale, 3D Secure for online shopping and PCI standards across stores and datacenters have rightfully received much press and attention as key elements in the fight against fraud.But serious organized criminals have recently been conquering these measures and getting away with wave after wave of coordinated attacks.As this trend grows it has become general consensus that these solutions alone are not adequate to deter professional criminals.
For the purpose of this piece, Chip &PIN/3D secure & PCI standards could be referred to as the first and second prongs with which to preventfraud.Theyare often seen as the building blocks of fraud prevention,commanding the ‘lion’s share’ of the limelight within the industry and the media. It could be said that these measures have become a ‘comfort blanket’ for merchants who misinterpret them as sufficient protection against fraud.
EMV Chip and PIN is smart technology standardised by Europay, MasterCard and Visa and replaced the magnetic strip technology on credit and debit cards in the UK. On a debit or credit card there is now a microchip read at POS by a Chip&PIN terminal. When the card holder enters their Personal Identification Number into the reader it is matched with the same number embedded on the microchip. This system fulfilled its initial brief and massively reduced instances of card present fraud. This led almost instantly to a shift of focus for fraudsters and a significant increase of card not present fraud. To combat this repercussion Visa launched 3D secure protocols which take the form of such initiatives as Verified by Visa and MasterCard Secure Code. This technology again works on a manually entered verification code provided by the consumer at the point of sale.
The above mentioned initiatives, along with the 12 standards of PCI, provide merchants with the fundamental tools needed to detect attempted fraud.However, Alaric is a firm advocate that a fraud prevention ‘hub’ or ‘third prong’, in the form of integrated fraud prevention software, should be valued at the same level as PCI Standards and EMV Chip & PIN/ 3DSecure. Merchants need to understand each of the 3 ‘prongs’ to have the most comprehensive approach to fraud prevention.
The reason for the development a third prong in a fraud prevention approach is simple; as the other security measures are becoming more sophisticated – and they are – the breaches which are arriving at the fraud prevention hub (the third prong) are becoming increasingly serious and costly.
To be clear, Chip &PIN, 3D Secure and PCI Standards are invaluable and are very efficient at what they are designed to do.They halt a vast amount of fraudulent activity. It is the fraud that is bypassing them which needs to be addressed and immobilized.
One approach proven to be highly effective is Artificial Intelligence ‘self-learning within fraud prevention software. A key benefit of self-learning is that it provides real time, inflight blocking of individual transactions which when compared to typical batch solutions, can save an institution as much as 90% of its fraud losses. This self-learning technology is a key companion to the more static approaches to fraud such as Chip &PIN and PCI standards.
Many acquirers and merchants may already have a fraud detection system in place, but in order to keep up with constantly emerging new fraud threats, companies should upgrade to an agile self-learning model.
Mike Alford, CEO at Alaric, says “Of utmost importance to Alaric, is the education of merchants regarding the risks to which they are susceptible and promoting the necessity of flexible in-house fraud prevention solutions. It is no longer enough just to secure payments transactions and central databases and to leave it at that. Merchants and acquirers should now turn their attention to installing intelligent software products that will automatically recognise patterns of fraudulent behaviour and stop them in their tracks before more damage is done.”
Mike Alford continues,“Our fraud prevention solution, Fractals 3.7, takes a truly innovative approach when fighting fraud attacks by applying Artificial Intelligence ‘self-learning’ within its fraud prevention software. A key benefit of self-learning is that it provides real time, inflight blocking of individual transactions which when compared to typical batch solutions, can save an institution as much as 90% of its fraud losses. It is simply not possible to achieve this level of protection without a bespoke solution. Any merchant without the most powerful real-time fraud prevention solution is now, more than ever, leaving themselves susceptible to serious fraud attacks.”
It is no longer enough just to secure payments transactions and central databases and to leave it at that. Merchants and acquirers should now turn their attention to installing intelligent software products that will automatically recognize patterns of fraudulent behavior and stop them in their tracks before more damage is done.
Headquartered in London, with international offices in Malaysia, Australia and the U.S., Alaric is a leading supplier of advanced technology payments products and services. Alaric offers solutions for both SOA-based and conventional multi-channel payments integration, card authorization, switching and routing, enterprise wide fraud detection and card fraud detection.
Alaric's products are fully platform independent and scalable to meet the needs of the largest financial institution, service provider or retailer. Used in combination, Alaric’s Authentic and Fractals products represent the highest performance payment switching and fraud solution available on the market.
Fractals enables a unique multi-institution, multi-lingual approach to enterprise fraud detection, allowing financial institutions, processors and retailers across the globe to deploy a holistic fraud management solution at an enterprise level. It is a single, integrated solution for issuer and acquirer fraud detection, providing economies of scale in hardware, database licences, staffing and training.
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