Mastercard Uses AI to Spot Real-Time Payments Fraud for UK Banks

Mastercard has teamed with nine British banks to fight fraud via artificial intelligence (AI).

Now live in the U.K., the company’s consumer fraud risk solution uses large-scale payments data to spot real-time payment scams before money leaves the victims’ accounts, Mastercard said in a news release Thursday (July 6).

The project is happening at a time when players on both sides of the law are using AI to either ferret out or carry out financial crimes.

“Organized criminals move ‘scammed’ funds through a series of ‘mule’ accounts to disguise them,” the news release said. “To counter this, for the past five years Mastercard has worked with UK banks to follow the flow of funds through these accounts, and then close them down.”

Taking insights from these traces and pairing them with factors like account names, payment values, payer and payee history, as well as the payee’s links to accounts associated with scams — Mastercard’s AI tool gives banks the intelligence they need to step in and block a payment before funds are lost.

The release also notes a rise in impersonation tactics by scammers in the face of increased payments and banking security.

As noted here in May, the U.K. has been plagued by a payments fraud epidemic in recent years, with authorized push payment (APP) fraud increasing 40% between 2020 and 2021. (Mastercard estimates it could cost $4.6 billion in just the U.S. and U.K. by 2026.)

This type of fraud involves criminals tricking a person or business into sending funds to a scammer’s account. According to Kate Frankish, chief business development officer at Pay.UK, APP can be tough to identify, especially for financial institutions

“From a bank’s perspective, it looks like a real payment, because the customer authorized it using all of their credentials. But it’s either going to an account that doesn’t belong to them or it’s going to a real person who has been scammed out of the money,” she told PYMNTS.

British banks are under added pressure of late to stop APP fraud, as the country’s Payment Systems Regulator (PSR) recently unveiled new requirements for banks and payment companies for reimbursing victims of APP fraud.

As PYMNTS reported last month, the new rules will incentivize all payment companies to take action, as firms on the sending and receiving end will split the cost of reimbursements 50/50. And they’ll have to act fast, the rules say most APP fraud victims will be reimbursed within five days, with additional protection for more vulnerable consumers.