- Payment & Fraud Editorials

First Published on 3^rd August, 2018

Ai Editorial: Managing cross-border payments is one aspect of business that demands constant attention. Ai’s Ritesh Gupta lists 5 key factors that merchants, including airlines, need to evaluate in detail to step up the acceptance rate.

For international airlines, as operators in multiple countries or continents, there is a need to deal with a variety of payment methods and different laws/ regulations.

A lot of introspection goes into optimizing the overall digital user experience, stepping up the acceptance rate, managing fraud, and being in control of the costs/ fees. This is because a lot goes on behind the scenes during the transfer of funds.  

Here we list 5 key factors that merchants, including airlines, need to study to optimize cross-border payments:

1.     Impact of regulation/ legislation: Regulatory interventions related to transactions are one area that airlines need to keep a vigil on. Be it for cutting down on costs, improving upon accessibility or paving way for innovation, the regulatory measures clearly indicate that there are plenty of ways in which the sector of payments is evolving.

Bringing down costs for cross-border transactions in euro as witnessed in the case of European Union is one example of this. Similarly other directives include capping of fees for debit and credit card transactions and restriction on surcharges for using such cards. For instance, airlines have been evaluating how to respond to PSD2 - the second EU Payment Services Directive - initiated to improve upon payment services across Europe. It mandates banks in the EU to facilitate users’ account details to other entities, with pre-approved customer consent. The European Commission decided that the second payment services should open the door for non-bank financial institutions to access banks’ data and bank accounts. The access is worked out to enable two categories of 3^rd party payment service provider: Payment Initiation Service Providers (PISPs) and Account Information Service Providers (AISPs). In this context, merchants have examined issues such as - will global retailers become PISPs themselves? Is PSD2 adding friction to payments? Do merchants need to focus on online banking e-payments as a viable alternative payment option? How have merchants been capitalizing on provisions allowed through PSD2?

2.     Market intricacies: There are payment-related issues that need to be settled at a local level. For instance, payouts related to China are high on the agenda of airlines, especially considering the growth of outbound sector. The distribution landscape is increasingly getting fragmented in China and travel suppliers need to strengthen their payment infrastructure to cater to their B2B partners. As highlighted by J. P. Morgan, a challenge associated with China pertains to each time Chinese suppliers receiving funds from overseas they need to complete documentation for the regulatory authority within a few days of receipt of funds. So it is important to settle cross-border payments to Chinese businesses and consumers, in local currency. Also for payout options, companies are trying to do away with ways that involve hefty transfer, conversion and interbank fees.  According to J. P. Morgan, some of the issues that need to be considered are - Is the payments provider a foreign exchange market maker with the ability to offer onshore foreign exchange rates for Chinese currency? Does encrypted file transmission and secure client data, meet local formatting requirements and fully preserve remittance data received by suppliers? Does the solution support local language and regulatory reporting to streamline document preparation?

Overall, Asia is riddled with challenges. For instance, each of the payment options in Asia has its uniqueness, e.g. transaction limit, availability of refund, no pre-authorization, chargeback rights. It will require airlines necessary effort to design and implement necessary payment interfaces and processing flows.

3.     Being spot on with acquiring: The role of an acquirer comes into the picture as merchants target higher card authorization rates, lower scheme and interchange fees, and faster merchant settlement. According to Adyen, a majority of global merchants settle for a blend of local and international (or cross-border) acquiring, but adopting local acquiring approach nearly always has a positive impact on authorization rates. Though this varies by market, a merchant will typically see as much as 0.5-0.6% in uplift after transitioning from cross-border to local acquiring. Mexico’s Viva Aerobus acknowledged that it had to work on its technology to facilitate payments from passengers abroad, as they used their international credit cards in various currencies, and there was also need to adhere to are local banking and industry regulations. The low-cost carrier chose Worldpay’s acquirer solution to process international transactions.

4.     Optimizing UX: A major part of airlines’ commerce strategy includes optimizing their digital assets by offering a frictionless payment experience. Consumers are in control – they pay via their chosen payment method and through the device they are using – so airlines have to support the same. In order to support shoppers around the world, it is vital to present checkout information that is customized according to a particular region. The focus needs to be on the language, currency and payment type etc. A cross-border payment processing system should automatically detect a shopper’s URL, serve the appropriate options in the preferred language and also adjust purchase prices to the correct currency.

5.     Payment infrastructure: Airlines need to design the integrated payment flow across payment options across channels and languages; implement integrated payment transaction and settlement reporting, gear up for multi-currency processing and conversion and opt for payment controls according to the difference of processing by payment types etc.

Hear from airlines and other industry executives about top payment-related trends at the upcoming 7th Annual Airline & Travel Payments Summit (ATPS), co-hosted with UATP, (4- 6 September 2018 in Phuket, Thailand).

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5th July, 2019

The development around sharing of banking (customer) data and make it available to non-bank third parties via APIs is being followed closely. As pointed by Edgar, Dunn & Company, one main aspect of EU’s landmark payments regulation, PSD2, is ‘access to accounts’ – this is effectively the ‘APIzation’ of bank accounts. Open APIs play a vital part at the heart of PSD2 compliance and open banking.

With open banking, a new financial services ecosystem is set to emerge. Even as issues related to data privacy and security are being raised and discussed, there is no doubt that merchants need to focus on opportunities from their customers’ perspective. Airlines need to make the most of the new regulation, which is resulting in opening up of the payments infrastructure and liberating customer data assets to offer consumers new options and services. “Open banking is one of the key regulatory changes, and it is going to impact the way merchants like airlines accept payments,” mentioned Pascal Burg, Director, Edgar, Dunn & Company (EDC).

Burg recommends that airlines need to “test and learn” about standards and infrastructure, and also application of the same from B2C and B2B perspective.

EDC suggests a three-phase approach for airlines to identify, evaluate and address payment opportunities and threats –

• 360° payments diagnostic/ audit

• Future state/ roadmap

• Roadmap execution - Interim payment team to support business to launch initiatives

By Ritesh Gupta

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First Published on 31^st January, 2019

Organizations need to reassess their respective data security and encryption strategy as they embrace cloud propositions and gear up for regulatory and compliance mandates, according to a new report.

Digital transformation today is being equated to an enterprise-wide, cross-functional undertaking, with key drivers being enhancing the customer experience, cutting down on operational costs and creation of new services or revenue streams.

Rather than just modernizing IT infrastructure, organizations are going deeper – right from the ownership to banking on cross-functional, collaborative groups for the entire organization to eventually gear up for playing an “infinite game”.

At the same time, as organizations plan to take advantage of cloud, mobile, social, and the Internet of Things, the rush to digital transformation is putting sensitive data at risk for organizations worldwide, according to the 2019 Thales Data Threat Report.

The report, based on a survey of 1,200 executives with responsibility for or influence over IT and data security, has stressed that shielding “sensitive data” is becoming increasingly complicated.

Dealing with intricate data environments 

The decision to focus on the cloud or multi-cloud environments is a part of the transformation being planned. Airlines are scrutinizing and even executing plans to embrace cloud transformation, banking on open-source offerings rather being bogged down by proprietary technology. Considering the complexity of the IT set up that this industry has, there are options available to integrate applications, data and processes across both on-premises and cloud environments. There are 3 models for cloud computing - Infrastructure as a Service, Platforms as a service and Software as a Service. Managing infrastructure and domain-specific IT systems for retailing, real-time data intelligence, running a digital asset on purpose-built, multi-cloud set up, payment optimization etc. are among the initiatives that airlines are undertaking to keep pace with their customers in digital economy.

But this shift is also being referred as a hurdle to working out apt data security action. This complexity is listed over other issues such as employee needs, budget issues and ensuring organizational go ahead.

The situation demands a thorough introspection. For instance, in order to ensure not even a single second of a shopper is wasted during the check-out phase, progress in this arena is being made in the form of regional cloud support, an initiative that can bridge the gap between an airline and a passenger irrespective of the location. So how such initiative would help? The fact that every second counts, payment specialists are curbing any delay in mobile load times. So it means every aspect of modern commerce needs to be studied in detail.

Recommendations from the report:

·          Cloud security must be seen as a shared security model between the enterprise customer and the PaaS, IaaS, or SaaS provider.

·          Enterprises must take on responsibility for ensuring data protections like encryption, tokenization, and masking within their environments or ensuring its protection when the data moves between SaaS applications or migrates to another application.

Other key findings listed in the report:

·          Concerns related to mobile payments include fraudsters using mobile payment apps for account takeover, new account fraud, exposure of PII, weak authentication protocols, and potential exposure of payment card information.

·          The main data security concerns around IoT include attacks on IoT devices, lack of frameworks and controls, and protecting sensitive data through encryption and tokenization.

·          Leading data security concerns regarding big data include sensitive data residing throughout the environment, data quality concerns, and privacy violations from internationally-originated data.

Hear from senior executives about data breaches at the upcoming ATPS (21st Century Customer Experience for Payments & Fraud - Airline & Travel Payments Summit) to be held in London (Brighton), UK  (7-9 May, 2019).

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Ai Video: Nethone's Rodrigo Camacho on managing fraud during crisis

29th April, 2020

Airlines are in a precarious situation, and it is tough to look beyond dealing with liquidity crisis. But there are certain issues that can't be ignored, and that includes countering the moves of fraudsters and scammers.

Ai's Ritesh Gupta interacted with Rodrigo Camacho, Nethone's Chief Commercial Officer about the same.

Camacho spoke about:

• "Cleaning-up" technology integrations
• Evaluating the tech stack for e-commerce and customer-centricity
• Phishing, account takeover attempts etc.
• Employee-related fraud - internal credentials
• Tracking fraudsters' activity
• Nethone's 100 days of free service and integration support

8^th October, 2020

Fraud prevention specialists are delving into what sort of novel buying patterns are emerging as they look to foil fraudsters’ plans for fraudulent transactions.

A major concern, as always, is to ensure a fraudster’s attempt shouldn’t go unnoticed, whereas a genuine customer doesn’t end up being denied to pay for a transaction.

Think of evolving purchasing hours, device usage…there are too many variables to consider.

How to tackle the issue then?

Machine learning’s role in fraud detection can’t be undermined but it shouldn’t be forgotten that it takes time to recalibrate. Relying only on transactional data may not work at this juncture.

A human fraud analyst can take charge and control the situation, ensuring a genuine shopper’s experience isn’t hampered. Reviewing transactions manually is equally important. It is imperative to make the most of an automated machine learning system with a rules-based approach.

Cybersource aptly puts it – it is time to let merchants “play by their own rules”. If machine learning needs time to recalibrate to new trends, they can adjust settings themselves in their tools to minimize any negative impact.  Analysts can work on business rules to eradicate false positives.

Join experts and explore new trends in payments and fraud at Ai’s Airline & Travel Payment Summit

#ATPS Virtual Conference 2020: 20 - 22 Oct 2020
 

https://lnkd.in/dHqfzvZ

First Published on 4th September, 2018

Machine learning (ML) and artificial intelligence (AI) can help in detecting more fraud with less manual effort and approving genuine customers faster.

ML can also reduce but not remove the amount of rules that need to be maintained, adapt to new types of fraud faster and offers accurate prediction to cut down on false positives, explained Ben Laurie, Head of Asia, Accertify, during a workshop held as a part of complimentary meeting of the Asia-Pacific Airlines Fraud Prevention Group in Phuket.

Organizations need to capture a diverse set of raw variables that describe the transaction, ensure data stability and cleanliness and transform data to create new predictive characteristics.

As for being pragmatic with what to expect from machine learning, it is important to just not rely only on predictive analytics. Problems arise when completely new transactions with no historical data are submitted into the system, and there is no way for the machine to predict whether or not the transaction is genuine or fraudulent. It is important to count on pattern recognition. So even without any prior historical data, the machine is able to detect patterns across different transactions and diagnose if the transaction exhibited bot behaviour or human behaviour. Using big data, the system collects information from the merchant’s website, such as the user’s web movement behaviour. Combined with pattern recognition, the system draws patterns (for both positive and negative behaviour) to map the DNA profile of the user, and determine if other incoming transactions exhibit the same (fraudulent) behaviour or not. The large quantity of information collected from big data makes it difficult for fraudsters to cover all of their tracks, therefore increasing the effectiveness of preventing fraud. Specialists recommend that pattern recognition, deep learning and stochastic optimization are also necessary for combining millions of test results to be crunched for an optimized yes or no decision in real-time.  

Deploying a multi-disciplinary approach combining different technologies - both supervised and unsupervised machine learning -  would better equip merchants to deal with fraud management. Unsupervised machine learning can be used to learn on the fly and identify fraudulent patterns even without having been trained with historical data, i.e. able to identify unknown fraud attacks. 

Machine learning systems are meant to be an improvement from rule-based systems, to reduce reliance on hard rules and to filter out fraud while passing more genuine users. However, machine learning systems only provide probability scores - or fraud scores - and would still require a team of manual reviewers to make sense of the score and thereafter a decision to pass or reject a transaction.

Curbing loyalty fraud

During the same workshop, Michael Smith, Co-Founder, Loyalty Fraud Prevention Association, referred to the issue of loyalty fraud. He highlighted that the issue of identity theft or payments fraud isn’t new. But the functioning of fraud rings, in which fraudsters band together in organized groups, continues to get sophisticated.

"Loyalty is big business, cash = fraud. It is important to balance the customer experience. It's a war, long war," said Smith.

Smith referred to the issue of synthetic identity fraud. This type of fraud doesn’t feature taking over existing identities and emerged since financial institutions improved how they prevent and detect traditional identity fraud. This forced fraudsters to nurture synthetic identity fraud. It is initiated by using a blend of fake information, such as a fictitious name, along with real data, to set up fraudulent accounts.  For instance, “Social security numbers” (in the U. S.) that get targeted most are ones infrequently used or ones those are less likely to use their credit actively, explained Smith.

As for account takeover (ATO) in the loyalty space, it is coming under scrutiny owing to data breaches.

Fraudsters get access to stolen credentials from a number of sources:

·          From data breaches, sold on the dark web

·          Phishing with fake websites

·          Malware, trojans, spyware

·          Social engineering

·          Hijacking a mobile device

The claim for owning an account needs to be handled carefully. Machine learning comes in to understand the user behaviour. Advancements in computing and big data power, as well as the gaining prominence of API-based machine learning solutions, mean that machine learning is emerging a scalable method to grow without increasing risk. It identifies patterns in data that aren’t spotted by humans. So this can result in lesser number of false positives and false negatives.

By Ritesh Gupta, in Phuket, for ATPS

17^th July, 2019

Mobile consumption patterns in general remain very exciting in China.

Ecosystems facilitate various daily activities and shopping requirements in a seamless manner. So a user doesn’t easily drop out from an ecosystem. The likes of Tencent and Alibaba continue to make rapid strides. There is plenty to learn from such extreme form of platform economies.

“They (Chinese companies and consumers) aren’t afraid of testing and embracing new concepts,” says Laurie Gablehouse, Global Head of Travel Solutions, Ingenico ePayments.

Indeed, as Laurie pointed out, Chinese consumers are more likely to adapt to technological innovations than travellers or consumers from other countries, say from Europe. China is shaping consumption patterns of global relevance.

The retail shopping/ experience on mobile has moved faster than the counterpart from the travel sector since the delivery of the product is different. “How has that crossed over into travel is still evolving,” said Laurie.

Convenience is clearly standing out as far as trends from China is concerned. It is all about instant gratification. Face recognition is one example of how companies are leveraging existing biometrics and will likely be taking them one step forward, authenticating and facilitating easier, faster, no-device-needed payments.

Hear from senior executives about mobile commerce in China and other Asian markets at the 8th Annual ATPS Asia-Pacific to be held in Penang, Malaysia (27-29 August, 2019).

15th June, 2020