Visa Inc (NYSE: V) announced on Sunday a new analysis showing Visa Advanced Authorization (VAA) using artificial intelligence (AI) helped financial institutions prevent an estimated $25bn in annual fraud—making the global payment ecosystem safer for retailers and consumers.
VAA is a comprehensive risk management tool that monitors and evaluates transaction authorisations on the visa global payment network, VisaNet, in real time to help financial institutions promptly identify and respond to emerging fraud patterns and trends.
The visa processed more than 127bn transactions between merchants and financial institutions on VisaNet last year, and employed AI to analyse 100% of the transactions—each in about one millisecond—so financial institutions can approve legitimate purchases while quickly identifying and preventing fraudulent transactions.
“One of the toughest challenges in payments is separating good transactions made by account holders from bad ones attempted by fraudsters without adding friction to the process,” said Melissa McSherry, senior vice president and global head of Data, Risk and Identity Products and Solutions, Visa.
“Visa was the first payment network to apply neural network-based AI in 1993 to analyse the riskiness of transactions in real time, and the impact on fraud was immediate. By striking the right balance between human expertise and technology innovation, we continue to evolve our capabilities as new AI breakthroughs expand the realm of what’s possible,” said McSherry.
For financial institutions, friction in the payment process can lead to the abandonment of a payment card. A study by Javelin Strategy & Research revealed more than half of cardholders affected by false declines (51%) used a secondary payment card to complete the purchase at the same merchant, which can push a competitor’s card to the top of wallet.
However, removing friction cannot come at the expense of identifying and preventing fraud. As a survey by the National Retail Federation and Forrester discovered, the top payment-related challenge faced by retailers is fraud, cited by 55% of those surveyed.
VAA is a layer of fraud prevention that can help drive down risk and fraud for financial institutions and retailers, and help reduce friction due to false declines for payment account holders. More than 8,000 financial institutions in 129 countries use VAA.
Visa pioneered using neural networks modelled after the human brain to power its AI platform to identify possible fraud. This delivers faster and deeper insights through previously unknown correlations.
Visa has kept global fraud rates at historic lows—less than 0.1%—through a multi-layered approach of investing in human intelligence and technology like AI; empowering consumers and clients with tools, resources, and control to manage risk, and setting governance processes to help businesses and regulators stay nimble.
“Consumers identified Visa as the most trusted company to provide financial services or payments among all payment networks and we believe it is due to Visa’s unrelenting focus on eliminating fraud and protecting the payment ecosystem,” said McSherry.