Tuesday, July 16, 2024

Mastercard introduces new AI model for bank fraud detection

One of the most universal challenges of financial institutions is to keep up with the constantly evolving landscape of fraud. The movement towards digital transactions has left financial institutions vulnerable to security breaches that result in loss of revenue, customer confidence, and public trust. However, Mastercard made a significant move with its cutting-edge proprietary generative artificial intelligence model, aimed to detect and root out fraudulent transactions.

In an exclusive interview with CNBC, Ajay Bhalla, Mastercard’s president of cyber and intelligence business unit, shared that the company developed the Decision Intelligence Pro, an advanced AI model that significantly enhances its capacity to help financial institutions evaluate suspicious transactions in real-time. The pressure on banks to navigate and assess the legality of transactions is high, and the AI model can help determine the legitimacy of such transactions with improved accuracy and speed.

Mastercard broke new ground by building its own proprietary recurrent neural network for this AI solution. This approach ensures that the company has full control over the technology, providing a level of customization and insight that might not have been accessible had they solely relied on open-source technology. The company’s proprietary algorithm is trained on data from a staggering 125 billion transactions that go through the card network annually, making it a well-informed and reliable tool for fraud detection.

The utilization of Mastercard’s AI algorithm marks a departure from textual inputs, using the history of a cardholder’s merchant visit as a prompt to determine the authenticity of a business involved in a transaction. This method is innovative in the sense that it generates pathways through Mastercard’s network, similar to heat-sensing radar, to form scores that determine the normalcy and legitimacy of transactions. What’s impressive is that the process happens in just 50 milliseconds, ensuring real-time fraud detection.

According to Mastercard, financial institutions implementing this AI technology reported an average improvement in fraud detection rates by 20%, with some realizing up to 300%. The company has been deliberate in its investment in cybersecurity and AI technologies, including a$7 billion investment over the last five years. This underlines Mastercard’s commitment to prioritizing the security and reliability of its payment network.

It’s not just Mastercard who’s investing in AI technologies, its competitor, Visa is also venturing into the AI space, indicating the growing importance of such technology in the financial sector. Mastercard’s algorithm is not just a means to prevent current fraud but, more importantly, it has the potential of identifying fraudulent patterns and trends to predict future types of fraud that are not yet known.

Mastercard’s investment in this advanced AI technology is indicative of the growing importance of AI in the financial sector. It has the potential to shape the future of the fraud detection landscape and ensure the sustainability and resilience of the global payments ecosystem. As Mastercard continues to leverage technology to solve complex financial challenges, it also sets a precedent for the industry to take AI and its capabilities more seriously. This new AI model from Mastercard surely puts forth a strong case for how AI can be harnessed to drive significant change in fraud detection and prevention.

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