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4 ways online fraud can be reduced by using artificial intelligence

Amelia Matthers832 31-Jul-2019

In this era of technology, the internet has proved to be a beneficial tool that has allowed it’s users to stay in touch with each other all across the world, watch unlimited videos and even shop while staying at home. It is also a great technology for organizations and companies to promote their business online and generate great revenue. However, these perks have now become the main reason for the increase in online fraud and cybercrimes. 

Online Fraud Trends:

Using your personal information like contact number, ID, credit cards for some online activity, makes you vulnerable to attack by the hackers and cybercriminals. The criminals these days are following different fraud trends which include:

First Party Fraud: In this type of crime, the criminals open their accounts to carry on their illegal transactions by hiding their identity or stealing someone’s else. 

Internal Party Fraud: There have been multiple cases, where an employee of an organization is found guilty of distributing or selling the private information of the end-users in the black market. In such frauds, the fraudster is none other than some insider of the company having access to the data.

Third-Party Fraud: Phishing emails are the best example of such frauds in which some other persons try to steal your identity and then carry on their crimes.

Online Fraud is no doubt one of the major concerns business faces these days. It can not only cause financial problems but can also harm the reputation of the company. But with rapid development in technology, now the online frauds can be prevented using Artificial Intelligence. Here are a few ways in which Artificial Intelligence can be helpful in reducing online fraud.

Transaction Authentication:

The transaction authentication method uses Artificial Intelligence technology to allow secure and real-time transactions. It is mostly used by the banking and finance sectors. It protects the customers from becoming the victim of transaction fraud by analyzing and studying the user’ contextual data and past behaviors. 

For example, if a customer makes a purchase from London and after a few hours, there is another transaction from the very same account/card in Canada, then the system will identify it as fraudulent activity. The reason being, unusual behavior of user’s purchases. In such cases, the system requires the user to verify his/her identity first.

2. Address Verification Systems:

One of the major applications of Artificial intelligence is Address verification services which are used to verify the identity of the user with the help of his physical address. Many fraudsters steal the personal of other people like (ID cards, driving license, credit/debit cards) and tamper some of the information claiming it as their identity. Using Address verification services, the systems can identify if the document is original or being tampered.

3. Fraud Detection in Real-Time:

The conventional online systems were readily prone to online attacks because of their structured algorithms and learning rules. The attackers can easily dodge those security layers. But artificial intelligence has taken the security of the system to another level due to its advanced technical rules. Using the AI technology now it is very easy to catch the fraudulent activity in real-time using different end-to-end verification services.

4. Controlling the Chargeback Levels:

Many small E-commerce businesses have low-profit margins to attract the new customer base. But if the customers are fraud, then all their sacrifice of low margins goes in waste and in some cases even they have to suffer a double loss. To control these chargebacks, AI-based algorithms are really helpful in verifying real customers and identifying the fraudsters.

To say that Artifical Intelligence has made a great impact on the security of business won’t be an understatement. Many small and large scale businesses are making a profit using different AI services for fraud prevention. 


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