Ai Editorial: Working out an apt infrastructure for payment optimization

First Published on 21st September, 2018

Ai Editorial: Airlines intend to take steps to control their payments strategy holistically. This gives them visibility into  payments in all their sales channels and in all countries, allowing them to identify inefficiencies, writes Ai's Ritesh Gupta

 

What can pave way for optimization of payment-related experience? It is a vital question, especially for travel merchants with cross-border operations.

Businesses can't wait for long to embrace a new payment method. Every minute detail is being scrutinized as far as removing friction from the shopping process is concerned. And if a customer abandons the shopping cart owing to inflexibility in payment-related options, then the likes of airlines aren't doing any good to their business.

Roadblocks to innovation

According to a recent study by Amadeus' payment business, travel e-commerce companies are pulled back by many factors when it comes to innovation in this space. The list includes consumer data security, credit card data security, fraud losses, complexity of existing payment systems etc.

So how to combat such major roadblocks to payments innovation?

"Airlines looking to innovate while at the same time keeping customer data safe should first carry out an audit of all the systems in their infrastructure which are storing or using that data," recommends Klein Wang, Head of Merchant Services APAC, Amadeus’ payments business.

Wang further added, "Then look to limit – or even eliminate – that data from their systems using techniques like tokenisation. When looking for a tokenisation provider, it is critical to find a provider whose tokens are compatible with all those systems which will need to use and interact with them."

Simplifying infrastructure

There tend to be issues with payment-related infrastructure and the role of partners that facilitate a payment. For instance, not all global payment processors handle acquiring banks and routing the same way. "Airlines work with a number of different acquiring banks and other related service providers. To simplify their payment infrastructure, airlines should look for payments providers which can give them access, control and visibility over their payments infrastructure in a single place. A single source of data and a single entry point to monitor and identify payments from across all their providers," mentioned Wang.

Also, talking of payment acceptance, it is vital for airlines to minimize costs with a more fluid workflow. For instance, what needs to be considered to route a payment to an appropriate acquiring bank? What does the study by Amadeus suggest? "It’s important for airlines to look at the total cost of their payments infrastructure, not just the direct acquiring cost. And many of them are doing that – although not all. With that in mind, the greatest opportunity for airlines today is in reducing the indirect costs of accepting payments caused by manual processes and inefficiencies which are the result of the complexity of managing payments across many different providers in different sales channels and markets," said Wang.

Alternate payment methods

According to Amadeus, many airlines have been adding new payment methods and today accept on average between six and ten different payment methods.

There are two challenges for airlines adding more payment methods: user experience and reporting.

"From a user experience perspective airlines need to find a way to offer the right payment method to the right customer without providing a bewildering list of different payment methods. From a reporting perspective, each new method of payment has a different reporting format so airlines need to work with a partner which can help to harmonise all these different formats so they can get a single view of all payments from all payment methods," said Wang.

Other than most popular or new options, airlines also need to work out a local checkout experience and at the same time being in a position to curb possible criminal fraud.

Wang mentioned that there is always a trade-off between verifying that a payment method is being correctly used by its owner on the one hand and creating an easy-to-use and seamless check-out experience.

"Using a fraud management tool to check the details for signs of potential fraud – in a way that is transparent to the end user – can really help here. Combining such techniques with the application of stronger authentication practises, 3D Secure for example, when the fraud management tool suggests dubious transactions, is a good way to balance consumer experience with effective fraud control," said Wang.

Airlines need to sort payment infrastructure related issues. In fact, as Wang says, for airlines looking at passengers from Asia, these problems even get more complex. "Many airlines are still not offering book and pay functionality on their mobile apps – in many markets, however, mobile is the default. In China, for example, 73% of all e-commerce purchases by value are made on a mobile device (Kleiner Perkins) and mobile payment volume grew 116% in 2017 over the previous year," said Wang. Asia has more diverse local payment practices, more local regulations and more payment providers to work with.  

 

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Ai Editorial: Use of app cloners and machine learning rises in mobile commerce fraud

First Published on 17th September, 2018

Ai Editorial: Considering the growth of mobile commerce, it is imperative for travel merchants to assess how fraudsters are crafting new techniques and tools for executing fraud through mobile devices, writes Ai’s Ritesh Gupta

 

Merchants can’t ignore mobile commerce. In fact, it doesn’t come as a surprise to see the way travel merchants are enhancing their apps with digital features and capabilities. The consumer is mobile and interconnected across multiple devices, shopping and switching from one to the other.

Shopping via mobile devices is flourishing. The growth rate is faster in certain countries, with China leading the way (m-commerce reached 93% of all e-commerce sales last year in China). In the U. S., an estimated 30% of all online sales are made on mobile devices. In Europe, transactions on mobile and desktop are estimated to be split 50-50. But is there any threat that is being ignored by travel merchants as the world of retailing is now mobile-first in most parts of the world?

“A new mobile commerce-related fraud technique that we found has emerged is the use of app cloners and machine learning techniques to create synthetic device identities,” says Justin Lie, CashShield’s CEO.

Mobile and synthetic identity fraud

Synthetic-identity fraud has already been described as the fastest-growing forms of identity theft in the U.S., according to the Department of Justice, as reported by CNBC.com in June this year. This kind of theft is working out a false identity using either fabricated or valid elements, such as a Social Security number, name, address, date of birth etc. As we highlighted in one of our articles this year, it often is not identified as fraud and the crime can go undetected for an indefinite period.

Even cloning has proven to be an issue for those who have been trying to control mobile device fraud.

For instance, a SIM swap attack in which a mobile number is hacked remains a problem. The fraudster takes control of a legitimate mobile user’s text messages, calls etc. Then login credentials are obtained through social engineering, phishing, an infected downloaded app etc. Mobile apps being reverse engineered and adding malicious code, too, has been around for a while.

As for how app cloners are being used in a malicious way, Lie shared, “Using app cloners, fraudsters can masquerade as multiple users to trick systems since the different transactions or logins will be detected as unique devices,” shared Lie.

Swift response 

In one of its recent blog posts regarding mobile bank fraud, Microsoft Azure stressed on the significance of latency and response time when it comes to fraud detection. The team mentioned that the time taken by a bank to respond to an illegitimate transaction “translates directly to how much financial loss can be prevented”. The response time window or detection needs to happen in mere two seconds.

“This means less than two seconds to process an incoming mobile activity, build a behavioral profile, evaluate the transaction for fraud, and determine if an action needs to be taken,” recommended the blog.

In this context, as Lie also stated, machine learning can be used to identify such new forms on fraud.

“For instance, whether or not an app cloner has been used may be collected and analyzed as one of the data points, in addition to the other various data points that will be analyzed to identify hidden patterns between the same transactions by the same fraudster,” mentioned Lie.

Making the most of signals

As for what signals are being considered for transactions coming from mobile when it comes to previous purchases and also pattern recognition for possible fraud in the future/ unknown attacks, Lie indicated that rather than focus on the signals for fraud, the company often tends to focus on signals that may point to positive genuine behavior of the user making the transaction. For example, if the user chooses to connect with social media, that is more likely genuine as most fraudsters who want a quick exit would not bother connecting with social media in making transactions.

“However, such signals are not necessarily accurate in pointing out fraud - a more sophisticated fraudster might put in more effort to imitate a genuine user, and connect with social media just to trick the system. Therefore, what is more important in identifying unknown attacks would still be to use real-time pattern recognition to draw patterns between incoming transactions, and identify coordinated fraud patterns,” added Lie.

 

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Ai Editorial: How robust is your data governance strategy? Apt for GDPR?

First Published on 12th September, 2018

Ai Editorial: Having a resilient and centralized data governance tool that can provide requisite information readily when needed will go a long way to comply with data regulations like GDPR, writes Ai’s Ritesh Gupta

 

It is imperative for businesses today to not only manage, understand and act on data, but also to ensure security and regulatory compliance.

Also, how to respond to strict regulatory environment, for instance, GDPR, where organizations could end up in a situation where they would need to adhere to a request regarding deletion of one’s personal data.

One key aspect pertaining to the whole initiative is data governance.

”Data governance is a key part of a robust and responsible data strategy that modern organizations cannot ignore,” says Kelvin Looi, Global Sales Executive, Unified Governance & Integration, IBM Analytics.

“Profiling each data to answer who, what, where, when and how, and to make this metadata available is fundamental. Basically, for each data, you need to understand what is the data all about, who owns it, where did it originates, where is it kept, when did it get there, and how the same is being processed,” said Looi, who was recently in Phuket for Ai’s 7th Annual ATPS Asia-Pacific.  

Compliance with a regulation like GDPR 

Having a robust and centralized data governance tool that can provide such information readily when needed will go a long way to comply with data regulations, like GDPR, to provide greater transparency of processing to data subjects on how data concerning them is collected, used, consulted and processed, asserted Looi.

Explaining further, he said ,”The `right to be forgotten’ article in GDPR is another requirement that will be difficult to achieve without a robust and centralized data governance tool. Basically, in many cases, data subjects have the right to request the deletion of their data and not to be contacted again. This request is almost impossible to comply with, without a tool to indicate where their data resides, and whether this data can actually be deleted without violating another regulation.

Data governance strategy 

E-commerce companies, including airlines, need to evaluate their data governance strategy to suit their organizational objectives.

“Forming a unit that is responsible for data governance would be a good start if you haven’t got one,” recommended Looi.

IBM has worked on a methodology for the same, and it goes through five phases:

1.     Assess,

2.     Design,

3.     Transform,

4.     Operate, and

5.     Conform

In the first phase, the focus is on conducting an assessment across governance, people, process, data and security. “From this assessment, we develop a target operating model that encompasses technical and organizational roadmaps,” said Looi. “In the second phase (design), we produce standards that cover governance, training, communication, privacy, data management and security management. During the transform phase, we conduct detail data discovery and embed standards, procedures, and tools to enhance existing processes. We also conduct the necessary training to ensure skills transfer.”


“In Operate, we ensure all relevant business processes and security control are executed. In Conform, we monitor, assess, audit, report and evaluate adherence to data governance target operating model,” mentioned Looi.

Managing availability and security 

On data availability and security, Looi recommended that profiling existing data environment and understanding where all the data is a meticulous way to start.

It is important to assess where all the data resides and how the data is connected to each other. Other considerations include what to protect and related accessibility (storing locally or in the cloud, encryption levels for data with different sensitivities, access rights etc.).

“When it comes to customer personal data, a few industries have implemented a customer hub, typically using a master data management solution to provide a “single source of truth” to customer data,” shared Looi. “This typically contains a registry to provide directory services to point to where customer data resides in different systems in a company. Industries like banks, insurance and healthcare are leading in this front. Industries such as airlines are far behind on this. The good news is some have started. Key GDPR requirements, like consent management, can be centrally managed in this customer hub. Companies who have implemented this customer hub will find an easier time to manage customer data availability and security, hand-in-hand with centrally managed customer consents and preferences. Many airlines still try to drive their customer centricity strategy off their loyalty system. But, a big portion of their passengers are not their loyalty club members,” shared Looi.

As for GDPR obligations, Looi, during his presentation referred to 5 areas:

1.     Rights of EU Data Subjects: enhanced rights for data subjects in the EU including notice, access, rectification, erasure, restriction, portability and objection; easier access to personal data with more information on processing available both clearly and understandably.

2.     Security of Personal Data: obligation to implement appropriate technical and organisational measures to ensure a level of security appropriate to the risk; includes 72-hour breach reporting to regulatory authorities and without undue delay to individuals in high risk scenarios.

3.     Lawfulness and Consent: processing only lawful if one of: consent, necessity, legal obligation, protection, public or legitimate interest or official authority; consent must be freely given, specific, informed, unambiguous and if a special category or certain other scenarios, explicit.

4.     Accountability of Compliance: need to demonstrate compliance with the principles relating to personal data processing pervades throughout the GDPR; include lawfulness, fairness, transparency, purpose/storage limitation, minimisation, accuracy, integrity and confidentiality.

5.     Data Protection By Design and By Default: Data controllers must implement technical and organisational measures demonstrating compliance with GDPR core principles; ensure the rights of data subjects are met and that only data necessary to the specific purpose are processed.

 

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Relying on a multi-disciplinary approach for curbing fraud via machine learning

 

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

Ai Editorial: How a cryptocurrency like bitcoin is faring as a payment method?

First Published on 8th August, 2018

Ai Editorial: Even as travel ecommerce players closely evaluate what to expect as far as bitcoin is concerned, they also need to consider the possibility of fraud, writes Ai’s Ritesh Gupta

 

The future of bitcoin is under scrutiny. Questions are being raised – is bitcoin investment safe? Has pricing been manipulated? Some believe that the cryptocurrency would bounce back, though the pricing has taken a beating this year.

As for the travel industry, the recent news pertaining to Expedia Group opting to remove bitcoin as one of its payment options is an important development. A certain section of the industry has shown penchant for accepting cryptocurrency payments over the years. But now it seems that travel merchants, including airlines, are not extensively going to opt for cryptocurrency until this payment method establishes its staying power and stability. Volatility associated with a cryptocurrency like bitcoin and counting the same as a payment method isn’t exactly a prudent combination.

Even as investors may enjoy the instability to an extent (it is also being pointed out that since it is dissimilar to stocks or bonds, it is tougher in comparison to unearth price manipulation and fraud in case of a cryptocurrency), for a currency to be a pragmatic option for both shoppers and merchants it has to attain stability. In fact, negative publicity around cryptocurrencies such as bitcoin isn’t helping the cause. A couple of months ago, the Justice Department in the U. S. was in news for probing whether traders were deploying unlawful tactics to dupe others into buying or selling cryptocurrencies. According to a report by Bloomberg, the department attempted to look into illegitimate initiatives such as spoofing and wash trading. Also, the fact that bitcoin is labelled as a relatively risk currency also doesn’t help, for instance, in case the private key is lost or stolen it ends up being an issue.  

The issue of trust 

Even as travel ecommerce players closely evaluate what to expect as far as bitcoin is concerned, they also need to consider the possibility of fraud.

According to a report by Bitcoin.com News, cryptocurrency fraud stood at $9 million per day in the initial months of this year.

Since cryptocurrencies rely on a public ledger called a blockchain, the issue of trust has surfaced. What if it results in distrust? Sift Science has emphasized that in case of cryptocurrencies like bitcoin, “trust quite literally is currency”.

On the positive side, it is being highlighted that crypto payments are attractive for high-risk ecommerce entities engaged in selling big ticket items. Largely, the industry terms these transactions as secure ones. Aspects like cryptocurrency transactions carrying no personal information, and lower or no fee, too, makes them luring. 

The way it works – when a user intends to transfer bitcoins to an individual or an entity, all computers running bitcoin software manage and administer the sender’s public signature through an algorithm and validate the previous transactions encoded in the blockchain to ensure the sender owns the bitcoins they say they do. This technology is regarded as a safe one. Overall, the trust has dwindled owing to a spate of deceitful initial coin offerings (ICOs), claims about mining services, and dubious practices on trading platforms. In a study of around 1500 cryptocurrency offerings, the Wall Street Journal found around one-third with red flags that include plagiarized investor documents, promises of guaranteed returns, and missing or fake executive teams. All the stakeholders need to be cautious. As highlighted by Kount, depending solely upon the regulatory bodies won’t be able to combat the increasing cryptocurrency fraud. Potential investors and businesses, too, need to educate themselves.

Merchants, including airlines, need to evaluate how bitcoin payments protect merchants against fraud and chargebacks. This is because chargebacks don’t work in a system built around blockchain. Also, there is a need to assess how does a cryptocurrency like bitcoin protect and compensate defrauded customers. Sift Science recommends that merchants should assess where their cryptocurrency was being stored and one should set up defenses accordingly. Also, companies taking bitcoin payment must be transparent and communicative with users when they decide to introduce crypto as a payment method.

 

Hear from experts at the upcoming 7th Annual ATPS Asia-Pacific, to be held in Phuket (4th – 6th Sep 2018). https://lnkd.in/fgEMiF6

 

Ai Editorial: Managing cross-border payments with aplomb

First Published on 3rd 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 3rd 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).

For more click here

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Ai Editorial: Dealing with a risk-averse mindset in fraud prevention

First Published on 25th July, 2018

Ai Editorial: A risk-averse mindset is commonly associated with rule-based systems, which is built with hard rules or buying limits, such as geo-location rules that could block out all transactions from one region, writes Ai's Ritesh Gupta

 

When merchants rely on conventional or long-used methods of spotting fraud, it tends to be associated with evaluating the standard fields (name, address, email, IP location, fingerprint and what can be found on the order form) and what transactions have cleared through the set rules.

The issue here is that those standard fields and hard rules are not tough for fraudsters/ hackers to break into and get breached once they have understood the rules worked out. For instance, it is quite straightforward for fraudsters to focus on new fake emails, and once they comprehend that a time based rule is set, they will attempt to set their program to go past the system. Not only so, authentic buyers are likely to be blocked. For instance, a geo-location rule would block customers booking transactions from ‘riskier’ locations.

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.

Unfortunately, the fraud team’s KPI is still to ensure fraud rates are low - perpetuating the risk-averse mindset as they would rather reject a transaction than to risk passing a fraudulent one. To overcome such “risk-averse” mindset, it would require the fraud team to understand that risk is very much similar to financial risk; it should be managed, not eliminated. Since 0% risk gives 0% returns, having little to no fraud would mean much revenue has been lost. For merchants to fully overcome having a “risk-averse” fraud management system, a financial algorithm could be combined with the machine learning system to make sense of the risk financially, allowing for more revenue based on a greater risk appetite.

Also by focusing on machine learning, carriers can eradicate all those needless rules that would have otherwise stopped authentic buyers from competing their respective transactions.

The blend of big data and machine learning paves way for more solid fraud prevention.

As we highlighted in our previous articles, to simplify big data and machine learning, big data is first used to garner details about the user’s behaviour on the website (how the mouse moves, what he likes or puts into his wishlist, etc), and this information is combined with machine learning, which uses pattern recognition to map the pattern of his behaviour to match it either with positive (genuine) or negative (fraudulent) behaviour, as well as predictive analytics that records the positive/negative behaviour and uses that on future transactions for potential signs of fraud.

Lastly, an optimized fraud risk algorithm should be used to make decisions on whether or not to accept a transaction based on calculated risks to best optimize sales while controlling fraud and chargeback rates.

 

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

For more click here

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Ai Editorial: Saving on shoppers’ every second during the check-out phase

First Published on 3rd July, 2018

Ai Editorial: Travel companies are digging deep, focusing on UX design and security to streamline the payment experience. For instance, payments security through tokenization isn’t new, but specialists are counting on cloud support to overcome the issue of latency, writes Ai’s Ritesh Gupta

 

A major concern for a digital shopper tends to be the closure of a transaction. This particular stage generally results in few anxious seconds for many. The whole promise of a simple and frictionless payment procedure can go for a toss even if a shopper, especially using a mobile device, is made to wait. This delay can hamper the experience and eventually there could be shopping abandonment.  

This is exemplified by the fact a one-second delay in mobile load times can impact mobile conversions by up to 20%, as found out by Google. The delay means it can cost travel merchants dearly since travel shopping tends to span across many sessions and is a prolonged one.  

Optimizing payments page for mobile 

Travel companies have been focusing on several areas to ensure one gets closer to transacting on mobile. Every aspect of payment-related user experience (UX) design is being handled adeptly.

Be it for designing the payment page or working out a specific interface for each device, the level of detailing has increased tremendously over the years. According to Adyen, it is imperative for travel merchants to work out a uniform experience across any device. Whether the user is paying in the native app, or via a mobile browser, the checkout phase needs to pave way for conversions on any screen size. Travel companies need to ensure they have latest information about their customers to facilitate their recurring transactions. Also, in case a user suffers owing to the Internet infrastructure being slow, then how about cutting down on the number of images downloaded. All these adjustments can go a long way in soothing the concerns of the shoppers. Plus, companies like Adyen are trying to be proactive by working out options to deliver user-related reporting (i.e. providing shopper-level information including shopper ID, card token, etc.). With these details, merchants may be able to precisely predict what a user’s next buy will be, and when and how the purchase will be made.

 

As for making the payment, a consumer today has the right to not even come across payment options (after they share their information once and transaction goes through with the primary card on file).

Also, optimizing for local payment methods is another important consideration. For airlines focusing on the Asia Pacific region, one needs to diligently prepare for diversity in payments. Working on such initiatives features many aspects that go beyond finalizing payment methods, and these include setting up processes and controls (currency management, currency heading, fraud prevention, and reconciliation and reporting), and compliance (PCIDSS, sensitive data protection, costs and reliability).

Security through tokenization 

Other than UX design, the shopper needs to be assured about security.

As Adyen highlights, everything that a merchant facilitates behind the screen” (e.g. tokenization of stored payment data, 1-click flows for subsequent purchases, or even use of account updater) should be clear and transparent to the users.

Payment specialists acknowledge that security is of utmost importance; however, the technologies deployed to shield a customer’s data can results in delays at the checkout stage and affect the payment experience -- especially for transactions coming in from remote locations. A 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.

For instance, Braintree chose to refine its payment platform with regional cloud support, starting with the US and in Australia in May this year.

Braintree, in a blog post, shared that this will enhance its tokenization offering, which converts sensitive cardholder information into a unique token or digital identifier. It replaces sensitive payment data that cannot be mathematically reversed, enabling merchants to run payment operations without handling raw payment data. Since a player like Braintree gathers card data directly from the shopper on the merchant’s digital asset the consumer’s privacy stays protected. Still there was a need to overcome the issue of increased latency arising in remote locations. In today’s fast paced shopping environment, microsecond latency counts. The time taken to transforming PAN (Primary Account Number) to token and back to PAN needs to be done in a swift manner, and this shouldn’t have any sort of negative impact on payment processing. With cloud support, the plan is to accelerate the checkout phase and augment the payment experience.

Importantly, the team at Braintree indicated that initial tests show that shoppers in Australia experienced an average upsurge in speed during checkout of about 2.5 seconds. The team explained that it studied the same in an infrastructure production environment – “10 times during 1 minute, the average time for requests made to the Braintree data center and the average time for requests made to its local cloud service”. Plus, this initiative combined with a new Content Delivery Network (CDN) service, which minimizes possible communication failure rates.

 

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

For more click here

Follow Ai on Twitter: @Ai_Connects_Us

 

Ai Editorial: How safe are ecosystems such as Amazon and Alibaba from the threat of ATO?

First Published on 21st June, 2018

Ai Editorial: What makes account takeover an even bigger threat for organizations is that an increasing number of enterprises are building online ecosystems, as well as branching into different services beyond their initial product offering, writes Ai’s Ritesh Gupta

 

The recent media reports pertaining to Amazon accounts getting hacked is a disturbing development. Considering how many consumers and the extent to which they rely on these ecosystems, the threat of fraud and its implications on various stakeholders involved needs to be assessed.

A plenty is at stake since a single platform can be used to access multiple services.  

If we considering an ecosystem such as Tencent’s WeChat, the Chinese company has gone beyond primary services of messaging and social networking over the years. Mobile wallet, bill pay, P2P transfers, merchant services, ticketing, insurance, wealth management and mutual fund management are among the services that WeChat is associated with. Similarly, the likes of Amazon and Alibaba, too, are proving to be a lucrative option for fraudsters as a single account on the black market can give fraudsters access to a treasure trove of data, including multiple stored payment methods, bank account information, usernames and passwords. In fact, as highlighted by Sift Science, in May this year, an Amazon customer became a casualty as she found in her email statement related to shopping of goods that she hadn’t bought. The amount totaled $1,640 in total purchases. As it turned out, a fraudster had gained access to her account without her permission and eventually Amazon (not a pleasant experience for customer and the reputation took a beating) suffered due to this account takeover (ATO) attempt.  

What makes account takeover an even bigger threat for organizations is that an increasing number of enterprises are building online ecosystems, as well as branching into different services beyond their initial product offering. A case in point is the growth in mobile payment systems, which fraudsters can easily exploit by adding stolen credit cards or making unauthorized transfers of credits from compromised accounts. With a growing connectivity of data, fraudsters can have unparalleled access to multiple services with just one single account. A case to examine is Amazon, where one single account may be used to access multiple services including Amazon Prime, Alexa, cloud storage, music streaming and more. Plus, the company is already expanding and introducing different services. For e. g. Amazon uses Amazon Pay as a virtual wallet system to be used within the app.

“With a growing connectivity of data in a world of frictionless payments, Amazon is at risk of various fraud scenarios such as having unauthorized transfers of Amazon Pay credits from compromised accounts,” says Justin Lie, CashShield’s CEO. “Once a single account is compromised, it would be difficult to have damage control on all possible endpoints that could benefit the fraudster. For instance, the fraudster could have access to the card-on-file to make purchases, or have access to the user’s information, or worse, in the case of IoT (e.g. Alexa), spy on the users in their homes.”

Dealing with vulnerability 

Fraudsters no longer only make unauthorized payments with stolen credit cards, but are also carrying out promo abuse with the creation of multiple accounts, making unauthorized transfer of funds, and making unauthorized top up of credits.

One way to safeguard such accounts includes a two-step verification, requiring users to fill in a security code whenever they access an account from a new device. Currently, fraud protection for accounts are still far behind, especially compared to the systems designed to secure payments. Most enterprises rely on static verification measures such as two-factor authentication (2FA) and multi-factor authentication (MFA), but is easily bypassed by fraudsters (e.g. via SIM hacks or SIM swaps) and creates unnecessary friction for users. Unfortunately, more must be done in terms of ensuring user accounts are secure from fraud. It is pointed out that many merchants struggle between striking a balance between improving security and maximizing user experience, which is difficult if their only known option is to either deploy 2FA/MFA or not. Rather than using a blanket rule that forces every user to login with 2FA, real-time surveillance can be used to assess logins in the background, and only logins with borderline risks expected to go through 2FA. This would greatly improve the user experience on the whole, while ensuring that security for accounts is not taken for granted.

Lie recommends that an end-to-end approach is needed to cover it all - to monitor transactions across multiple channels and devices in real time, at every stage of the process. From front-end filters detecting fraudulent logins to machine automation preventing fraudulent purchases and chargebacks through illegitimate account takeovers, these ecosystems must consider deploying sophisticated end-to-end solutions that can cover their bases.

It is time that ecosystems and even other companies make rapid progress since account takeover is indeed occurring more frequently - according to the 2018 Javelin Strategy & Research Report, account takeovers tripled in 2017, which resulted in $5.1 billion in associated losses.

When data breaches occur, consumers have no control. Yet when it comes to account takeovers, customers are told to play an active role in prevention by being vigilant and having complex passwords, even though a data breach would leak all passwords, no matter how complex it is. Lie says it is up to the merchant’s end to adopt stricter security protocols in storing and encrypting their data, to minimize the damage in case of a data breach. Considering that it is impossible to build the perfect defense, merchants could also aim to mitigate the damage done by ensuring that the stolen data cannot be used. One way to achieve this is to deploy real-time active surveillance on every login to filter out potential threats and prevent attackers from gaining unauthorized access to accounts.

 

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

For more click here

Follow Ai on Twitter: @Ai_Connects_Us

 

Ai Editorial: Time for airlines to leverage both supervised and unsupervised ML for curbing fraud

First Published on 14th June, 2018

Ai Editorial: Deploying a multi-disciplinary approach combining different technologies - both supervised and unsupervised machine learning (ML) -  would better equip merchants to deal with fraud management, writes Ai's Ritesh Gupta

 

The travel industry needs to dig deeper to understand the efficacy of machine learning and its role in curbing payment fraud as well as the rising issue of account takeovers.

Machine learning often encompasses different types, and simply using one type (predictive analytics) is insufficient.

Supervised machine learning is considered to be a reactive approach to treat fraud. It has contributed in combating fraud to a certain extent – automating some processes, garnering more data to evaluate, but the industry has to capitalize on real-time machine learning as well.

Without real-time learning, supervised machine learning is unable to forecast and offset unfamiliar fraud attacks, since it is dependent only on the data on previous fraud attacks. Also, these systems can only generate probability scores for each transaction, therefore still involving manual reviews.

Many fraud solutions on the market are built with machine learning, but they are built with only one machine learning model (e.g. Random Forest) and the belief that relying on one model will be sufficient in allowing them to detect and prevent coordinated fraud attacks, says Justin Lie, CashShield’s CEO.

"Most travel e-commerce merchants still rely on this single disciplinary approach, requiring historical data to make correlations detect anomalies. However, as fraudsters become increasingly sophisticated, using machine learning for their attacks, they can get ahead by flooding systems with so much fake data that they pass through undetected," cautioned Lie.

Lie added, "As such, 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. Thereafter, predictive analytics may still be used to run the probabilities of fraud, giving a risk score."

Unsupervised machine learning is able to seek patterns and correlation amidst the new data collected, which helps to identify positive and negative behaviour, and is effective in identifying genuine customers as much as identifying fraudsters. Specialists recommend that pattern recognition, deep learning and stochastic optimization are also necessary for an optimized yes or no decision in real-time.

Making it work

Lie explained how the combination of unsupervised machine learning and supervised machine learning can work best in curbing fraud. He mentioned:

  • Supervised machine learning relies on historical data to predict and prevent further possibilities of fraud based on past fraud. The data set is labelled based on previous observations of fraud, and is described as either fraudulent or genuine. With this data set, there is a historical representation of fraud and transactions can then be determined if they are fraudulent based on these labels. If a fraudster uses a known attack, fraudulent patterns can be identified and stopped before it happens.
  • As for unsupervised machine learning, the data is unlabelled and the machine looks out for transactions which deviates from the norm. These transactions are classified into clusters and patterns across this are tracked, then determined if they are indicative of fraud. This new data is then labelled as either fraudulent or genuine. By learning on the fly, unsupervised machine learning is able to detect new forms of fraud and does not rely on historical examples. By analyzing millions of patterns in real-time, it is able to self learn and recognize new attack techniques, stopping fraud before it happens.

Blend of big data and machine learning

The combination of big data and machine learning allows more effective fraud prevention.  Big data is first used to garner details about the user’s behaviour on the website (for e. g. the movement of the mouse) which  is combined with machine learning. There is use of pattern recognition to configure this user's behaviour to tally it either with authentic or fraudulent behaviour. Along with this predictive analytics comes into play to record the positive/ negative behaviour and avail that on future transactions for probable signs of fraud. Finally, an optimized fraud risk algorithm needs to be counted upon to make decisions on whether or not to accept a transaction based on calculated risks to best optimize sales while controlling fraud and chargeback rates.

"Big data allows for more data collected - but relevant data is more important than collecting more data. Collecting data from the merchant’s website and behavioral data beyond payment data will be useful for analysis on the user’s behavior - whether good or bad," mentioned Lie.

A transaction may be sliced into multiple data points, where it may then be combined with real-time machine learning to match patterns through the permutations and combinations of the data points, as well as to identify when fraudsters make micro-changes between transactions (such as changing the device from iOS to Android between transactions to seem like the transactions come from a different source). As it turns out, most systems are still relying on a single disciplinary approach, and a multi-disciplinary approach that combines big data, predictive analytics and real-time machine learning would be more effective in detecting coordinated fraud attacks, recommended Lie.

Act and take charge

Travel merchants need to defend themselves adequately by using machine learning, and at the same time there needs to be reliance on rules and the human component (intervention and feedback) as well.

Merchants should learn to discern and understand the different types of machine learning, and be sure to know if the fraud solution uses only predictive analytics or covers more bases with more than one kind of machine learning. Machine learning technologies are yet to be deployed commonplace to secure accounts, even though machine learning, especially real-time machine learning can be applied on account protection.

Lie concluded with a word of caution for merchants: Many merchants are also still reliant on manual reviews, which means that even if they were able to improve their machine learning algorithms and systems, they would always still be held back by the end process of manual reviews and human errors.

 

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

For more click here

Follow Ai on Twitter: @Ai_Connects_Us

 

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