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December 20, 2019

The Three Facets of Fighting Against Fraud


The fight against fraud for digital payments resides on the 3 vertices – Education, Experience, and Intelligence.

Digital payments in India are seeing a CAGR growth of 12.7% * thanks to government push, new-age apps, the proliferation of eCommerce giants and the young Indian demography. While we stress on the adoption of digital payments– i.e. what to do and how to do – we focus little on what not to do – and that is precisely where Education is required. Technology is only as strong as its user. So end-user education is of utmost importance for fraud mitigation. And though the volume of digital transactions has surged, end users are still not self-sufficient enough to complete an end-to-end transaction. People are still dependant on the middle man or correspondent to complete a digital transaction. And more the number of intermediaries in the transaction path, greater the chances of fraud. Education is also about enabling users of digital India to be self-reliant. The government, central bodies, and the banks have a pivotal role in educating the public on the correct usage of digital payments.

Experience is post facto realization gained over an extended timeline. Experience teaches us to respond to a similar future event with greater consciousness and caution than we did (or did not) in the past. For payment transactions, experience is put into execution in the form of mandates and business rules. In the digital payments world, cards represent the traditional way for retail payments. Experience comes in handy for digital payments channels like ATM, PoS, eCOM which involves cards. Such experience can be imbibed for in-flight transactions using fraud and risk management tools like FICO’s Falcon, Threatmetrix, RS IntelliEdge™, etc. However, experience is limited by the depth of past knowledge and breadth of future intuition. And the current digital transaction pattern has shown a drift from cards to alternate channels like A2A and RTP based transfers. The government has also enabled biometric payments and mandated electronic toll collection. The past experience in these areas is limited or minimal and we have to depend on common sense and intuition to formulate business rules and mandates to counter fraud.

Evolving payments channels, new touch-points, and novel use cases call for a third vector to fight fraud – Intelligence. And Intelligence is bi-fold – it involves both human and artificial intelligence. While human intelligence is implemented in the form of business rules, Artificial Intelligence through machine learning can track hidden patterns in the data which go unidentified by the human eye and experience. Some of the contemporary FRM tools use machine learning gained through terabytes of data crunching to alert suspicious activities for in-flight transactions. Just as Business Intelligence is curated with human knowledge, Artificial Intelligence relies on data for its maturity. And data has its own challenges – particularly in countries like India where fraud reporting is nominal.

Fraud always tries to find the path of least resistance. Fraud mitigation at the same time requires a centralized and federated approach – from the government to payment networks to Banks down to the end-users.
RS IntelliEdge™ is built for a centralized view of fraud. While educating the end-user is still the key, RS IntelliEdge™ fills up the other 2 blocks – experience and intelligence – required to counter fraud.


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