The Rise of AI Tools and Real-Time Payments Fuels Surge in Fraud – Industry Consortiums Form to Combat Threat
The rise of artificial intelligence (AI) tools and real-time payments in the United States has resulted in a surge of fraudulent activities. Fraudsters are taking advantage of the easy accessibility of AI technology and the speed of real-time payments to carry out their illicit schemes. This alarming trend has prompted the formation of industry consortiums aimed at combating this growing threat.
The transition from an analog to a digital world has opened the floodgates for fraud, which has become an unfortunate and pervasive theme in our everyday lives. Both consumers and businesses are affected by this, and it raises questions about liability and the level of friction introduced into the payment process to mitigate such activities. In a world built on trust, businesses are taking proactive measures to tackle this monumental challenge facing our digital economy.
Trustmi, a payment security platform, recently made headlines by securing $17 million in funding. This end-to-end security platform is dedicated to addressing the complex issue of protecting payments. Gili Raanan, founder of fintech company Cyberstarts, stated that safeguarding payments is one of the most painful and complex challenges for any modern organization. With the rollout of real-time payments by The Clearing House on their RTP Network and the availability of AI tools and large language models that can run on local machines, the stage is set for an influx of fraud.
To address this threat, several industry consortiums have emerged over the past month. SardineX, led by Soups Ranjan and his team of fraud squad Sardines, is a group that includes prominent organizations such as Chesapeake Bank, Visa, Airbase, Blockchain.com, Alloy Labs Alliance, iLex, and Novo. Their primary objective is to curtail payment fraud.
Another consortium, Beacon, is a collaborative anti-fraud network that enables financial institutions and fintech companies to share crucial fraud intelligence via API across Plaid. Plaid, along with 10 other founding members including Tally, Credit Genie, Veridian Credit Union, and Promise Finance, is spearheading this effort.
Mastercard is leading its own AI-related initiatives in the United Kingdom, partnering with nine prominent banks such as Lloyds Bank, Halifax, Bank of Scotland, and Monzo.
While the formation of these consortiums is a positive development, there is a need for greater collaboration to tackle this issue effectively. The sharing of data among consortiums is essential to ensure a unified front against fraud. Instead of individual consortiums working in isolation, it would be more beneficial for major players like Visa and Mastercard to share data across networks.
Two main factors impede our ability to address this issue comprehensively. Increasing data-related regulations and associated legal, security, and privacy risks are barriers to data sharing. However, mature clients understand that secure data flow among individuals, organizations, and governments can lead to better decisions and improved outcomes for businesses and society as a whole.
Given that AI and real-time payments are the driving forces behind the surge in fraud, collaboration between the private and public sectors is necessary to combat this threat effectively. Disjointed and ineffective solutions that only address niche use cases are not the answer. Further regulation alone will not suffice. A defensive AI strategy, with comprehensive participation from all relevant platforms fighting fraudsters on the frontlines, is crucial.
In conclusion, the rise of AI tools and real-time payments has fueled a surge in fraud. Industry consortiums have formed to tackle this growing threat, but greater collaboration and data sharing are needed to address the issue effectively. A comprehensive defensive AI strategy, along with a united front from relevant platforms, is necessary to protect our digital economy from the detrimental effects of fraud.
