How AI is changing payment fraud prevention: From evolving scams to predictive defenses - Tearsheet

"Fraudsters are using AI to launch more sophisticated, targeted attacks, resulting in financial losses for organizations everywhere. Mastercard recently commissioned new research from Financial Times Longitude, surveying 300 senior fraud and risk executives across the globe. The report found that leaders are battling rising fraud, and on average, their firms are losing $60 million in annual revenue to payment fraud. Yet the very tech behind the threat also holds the cure."

"42% of issuers and 26% of acquirers report saving more than $5 million over the past two years by using AI in fraud prevention. Issuers, who sit closest to the transaction authorization moment, see the strongest upside from AI in reducing false positives and sharpening fraud detection. Acquirers are catching up with these gains but often contend with more fragmented data sources."

"Firms are turning to AI to sift through vast transaction volumes, identify anomalies, and stress-test systems against fraud. Anomaly detection is AI's most effective line of defense in fraud prevention, used by 60% of executives and their organizations, with real-time threat analysis close behind at 58%. More than half also put their trust in AI for vulnerability scanning (52%), predictive modeling (51%), and ethical hacking (50%)."

Fraudsters use AI to launch more sophisticated, targeted attacks that cause widespread financial losses. Firms are losing an average of $60 million annually to payment fraud. Financial institutions are increasingly deploying AI to bolster defenses and recover revenue. Forty-two percent of issuers and 26% of acquirers report saving more than $5 million over two years through AI-driven fraud prevention. Issuers see the strongest gains by reducing false positives and sharpening detection; acquirers face more fragmented data. Merchant and wallet provider savings are harder to quantify due to smaller losses or reimbursement shifts. Deep data integration into decision workflows accelerates AI ROI. Anomaly detection, real-time threat analysis, vulnerability scanning, predictive modeling, and ethical hacking are key AI tactics.

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