Acquirers Step Up Battle Against Fraud With GenAI, Biometrics Push

For merchants seeking to deliver a seamless omnichannel experience to their consumers, fraud remains a persistent concern. And while they look to acquirers to offer up the payment innovations that help satisfy customers’ desires to transact digitally on their mobile devices, they also want acquirers to help them battle the tide of rising fraud.

In the report “Bridging the Gap: Helping Acquirers Meet Evolving Merchant Demands,” done by PYMNTS Intelligence and Visa Acceptance Solutions, we found that among the most valuable range of services offered by acquirers has been their ability to bring emerging technologies to their merchant clients.

Resourceful Fraudsters

Fraudsters, of course, are nothing if not resourceful. They evolve with the times and harness everything from text-based scams to artificial intelligence (AI) deepfakes to ply their trade. Most acquirers have seen an increase in fraud, and have pointed to the bad actors’ use of AI, cyberattacks and data breaches to create new avenues of attack.

None of this is to suggest that they are not fighting fire with fire. The research shows that the acquirers are investing in AI, data-driven analytics, and other technologies to bolster their own fraud defenses, particularly with riskier merchant categories, and to broaden the range of what they offer to merchants.

Minding the Gap

More than 4 in 10 acquirers in the eight countries we surveyed reported an increase in fraud over the last year, while only one-fifth cited a decrease. There’s a gap between smaller and larger acquirers. This rise is far more dramatic for small acquirers, where processing volumes are below the $1 billion threshold, with more than 7 in 10 experiencing increases in fraud rates and none of the firms surveyed reported decreases.

Of the acquirers who said that fraud was on the rise, 8 in 10 indicated faster payment speeds played a role, suggesting their existing anti-fraud systems and strategies cannot keep up.

There’s an acknowledgment of the pressures that merchant clients face. Seventy-two percent of acquirers we surveyed said that payment and fraud management issues were among the key reasons companies were not able to meet their goals of offering consumers unified commerce.

“Of course, most acquirers have already implemented a range of fraud prevention technologies,” PYMNTS Intelligence wrote.  The most common features provided into the market include consumer transaction alerts, automated fraud responses, AI or machine learning (ML) systems, and fraud prevention APIs. Altogether, most acquirers — 8 in 10 — use these features.

But there’s a drive to embrace a greater range of advanced technologies. Only 55% of acquirers support biometric authentication, but merchants and their end users want those features, which can include fingerprint and facial scans.

The acquirers are heeding the call, as another 23% of acquirers plan on offering biometrics. And drilling down a bit, 47% of acquirers don’t use GenAI but want to, and 53% say they use behavioral analytics, while another 30% say that there are plans in the works to use to offer those capabilities.

Most of these technologies are on offer from third-party providers, in modular form, so the acquirers who have near-term implementation plans (and those who have yet to have plans in place) would be able to get there with relative ease.