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AI-native Vital for $67Billion Payment Fraud Prevention Market

The fraud prevention industry is experiencing rapid growth in response to amplified regulatory pressure and increasingly sophisticated threats of online fraud.

Dorian Maillard, vice president at investment bank  DAI Magister, outlines the significant growth of the fraud prevention market due to the rise of digital payments, stressing the need for companies to enhance their strategies in response to evolving fraud risks and tighter regulations.

Dorian Maillard, Vice President at DAI Magister
Dorian Maillard, vice president at DAI Magister

The meteoric rise of digital payments over the past decade has been a double-edged sword. It has revolutionised convenience for consumers and created new business opportunities, but it has also opened a Pandora’s box of fraud risks.

This growing threat landscape is set to significantly propel the growth of the fraud prevention market, which is predicted to more than double to $67billion by 2028.

Digital payments, encompassing everything from online shopping and mobile payments to e-commerce, have created a vast new playing field for fraudsters to exploit. These malicious scammers are growing in number and refining their strategies, employing ever more sophisticated methods, including account takeovers, synthetic identity fraud, and social engineering scams. In the UK alone, fraudsters syphoned off £1.2billion in 2022, with almost 80 per cent of app fraud cases starting online.

As the financial toll climbs, regulators worldwide are stepping up, implementing stricter security and compliance mandates to safeguard the digital payment ecosystem and enforce corporate accountability in fraud prevention. The UK’s recent Economic Crime and Transparency Act 2023, which includes a provision to make businesses liable if they fail to prevent staff or a connected third party from committing an economic crime, is one such example.

Amid this backdrop, where advanced fraud schemes meet tightening regulations, companies across industries have little choice but to elevate their fraud prevention strategies. Investing in advanced solutions that can navigate the evolving regulatory landscape and protect against increasingly sophisticated tactics has become more critical than ever.

Key benefits of digital fraud prevention tools
Real-time monitoring leveraging fraud detection algorithms

The power of modern fraud detection tools lies in their ability to monitor transactions and user behaviour continuously, in real time. By analysing vast datasets, these tools can spot anomalies that signal fraudulent activities, such as unusual spending patterns or suspicious login attempts, with greater accuracy and efficiency. This ensures enhanced protection against fraudulent activities while allowing legitimate transactions to flow smoothly without unnecessary interruptions or delays.

Scalability and customisation

As businesses grow, so does their need for scalable and customisable fraud prevention solutions. Cloud-native digital fraud prevention tools are particularly adept at meeting these needs, offering the flexibility to scale with a business’s growth and the adaptability to respond to evolving transaction volumes and fraud strategies. These tools also enable businesses to tailor their fraud prevention measures, allowing for the integration of industry-specific rules and parameters that align with their unique risk profiles.

Enhanced security and regulatory compliance

In sectors like finance, healthcare, and technology, stringent regulations govern the protection of sensitive information from unauthorised access or misuse. These regulations mandate comprehensive measures, including data encryption, secure storage, meticulous access control, and detailed reporting of security breaches or suspicious activities. Integrating digital fraud prevention tools that offer multi-layered security features, such as encryption, authentication, and robust access controls, allows organisations in heavily regulated sectors to meet these stringent security requirements more efficiently and effectively.

Improved customer retention and financials

Implementing strong fraud prevention measures demonstrates a business’s commitment to protecting its customers’ security, an essential aspect of building a trustworthy relationship. This commitment instils trust and fosters a deep sense of loyalty among customers. When customers feel secure and valued, they are more likely to continue using the services or products of a business, leading to increased customer retention. Over time, this loyalty translates into sustained revenue growth as satisfied customers make repeat purchases and are more likely to recommend a business to others, expanding the customer base and boosting revenue further.

AI-native technologies unlock new possibilities
Advanced fraud detection and prediction

AI-powered fraud detection utilises advanced algorithms to do more than analyse real-time transactions. These algorithms learn from historical trends and predict potential fraud risks before they even happen. This proactive approach offers a significant advantage over traditional methods, which often play catch-up with fraudsters’ ever-evolving tactics.

Multi-dimensional analysis

AI algorithms are powerful detectives in the fight against fraud. They can analyse diverse data sources, such as transaction history, device fingerprinting, geolocation data, and social media activity, to create a comprehensive risk assessment for every transaction.

Automation of operations

AI automates many aspects of fraud detection and prevention, significantly reducing the need for manual intervention and enabling organisations to efficiently process a higher volume of transactions.

A consolidated future for fraud prevention

The battle against fraud faces a double threat: smarter criminals and stricter regulations. Fraudsters are deploying ever-more sophisticated tactics, leading to billions in losses annually. Adding fuel to the fire are increasingly stringent regulations, especially for companies operating across borders. This creates a perfect storm – businesses need advanced technology to combat a growing array of fraud risks while navigating complex compliance requirements in multiple regions. The diverse and complicated nature of these challenges is increasing the demand for comprehensive fraud protection solutions incorporating advanced analytics, machine learning, and AI capabilities.

Consolidation allows fraud prevention providers to acquire the advanced technologies and expertise to offer more comprehensive and globally scalable solutions to meet these requirements. It also enables providers to cater to growing customer preferences for integrated, end-to-end solutions that provide a wide range of capabilities, from detection to prevention and mitigation.

Rapid technological advancements will also likely further propel this consolidation in the sector as developing effective in-house AI-native solutions is becoming increasingly complex and resource-intensive, especially for large incumbent players that have yet to fully embrace the technology and AI shift.

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