Online transactions have seen substantial growth in recent years, leading to an increased risk of fraud within the payment industry. As this threat persists, payment networks are resorting to innovative solutions involving data analytics and artificial intelligence to uncover the truth behind transactions and address instances of first-party fraud effectively.
First-party fraud, a deceptive practice where consumers dispute legitimate charges to gain credit while holding onto the received goods or services, poses a significant challenge for detecting fraudulent activities. This type of fraud is particularly elusive as it involves individuals using their own cards on their personal devices, making it harder to detect suspicious behavior.
In response to the escalating issue of fraud, Mastercard has acknowledged the necessity of a preemptive approach to fraud prevention and spearheaded the development of the First Party Trust Program. Expected to be rolled out in the near future, this initiative leverages advanced transaction insights, artificial intelligence, and risk modeling to combat fraudulent activities. By scrutinizing the purchasing history and behavioral patterns of cardholders, the program aims to pinpoint potential instances of first-party fraud.
Mastercard’s program introduces a mechanism allowing merchants to furnish relevant information during transactions, establishing a secure avenue for the exchange of data. This collaborative effort, in conjunction with Mastercard’s network-level analytics, is poised to reveal crucial insights that may point towards incidents of first-party fraud.
The advent of Visa’s Compelling Evidence 3.0 (CE 3.0) program showcases the network’s commitment to tackling first-party fraud head-on. By meticulously examining key identifying factors such as user ID, device ID, IP address, or shipping address, Visa traces the historical link between cardholders and merchants to ascertain the authenticity of disputed transactions.
As the menace of first-party fraud continues to loom large, various providers are stepping into the fray with their strategic solutions. Socure, for instance, has introduced Sigma First-Party Fraud and the First-Party Fraud Consortium (FPFC), where the incorporation of alternative data signals, not typically present in credit reports, plays a pivotal role in the sophisticated analysis and prevention of first-party fraud instances.
FAQ
1. What is first-party fraud?
First-party fraud refers to consumers disputing legitimate charges to receive credit while retaining the goods or services they obtained.
2. How does Mastercard’s First Party Trust Program function?
Mastercard’s program employs enhanced transaction insights, artificial intelligence, and risk modeling to detect potential instances of first-party fraud. Merchants can share pertinent information during transactions, ensuring a secure data exchange.
3. What is Visa’s Compelling Evidence 3.0 program’s approach to combat first-party fraud?
Visa’s CE 3.0 program examines key identifying elements like user ID, device ID, IP address, or shipping address to establish a historical connection between cardholders and merchants, verifying the legitimacy of disputed transactions.
4. How does Socure’s Sigma First-Party Fraud solution operate?
Socure’s Sigma First-Party Fraud solution utilizes non-traditional data signals absent from credit reports to identify and prevent first-party fraud instances effectively.
Fraudulent activities and disputed transactions pose substantial challenges for merchants, impacting their financial standings significantly. With fraud-related costs being a major source of disputes for 77% of merchants, and 48% receiving alerts from card networks regarding disputes, 20% of merchants resort to third-party data-sharing services to mitigate risks.
The proactive stance taken by payment networks in safeguarding against fraudulent disputes underscores their commitment to ensuring secure transactions through the amalgamation of cutting-edge technologies, data analytics, and partnerships with merchants.
Sources:
– Mastercard
– Visa
– Socure
– PYMNTS Intelligence data
The source of the article is from the blog scimag.news
