Predicting payment fraud: The power of real time analytics

SAS Fraud Management equips Nets with unmatched capabilities to predict and prevent fraud

Global digital payment transactions are projected to reach US$11.5 trillion in 2024 – that’s $22 million processed every minute, 24 hours a day, seven days a week. That’s a lot of activity to camouflage fraud. Fraudsters thrive in chaos. In fact, they rely on it.

Nets, part of Nexi Group, is one of Europe’s largest digital payment services providers. It serves 740,000 merchants via point-of-sale terminals, e-commerce and payment processing, and provides 250 banks and other card issuers with card processing, fraud and dispute services, and data analytics.

The exponential growth in online shopping in recent years has had mixed effects. Global e-commerce sales reached $4.2 trillion in 2020 and are projected to nearly double to $8 trillion by 2027. However, this growth is accompanied by a significant increase in fraud, with global merchant losses from online payment fraud predicted to exceed $362 billion from 2023 to 2028.

Payment fraud has become increasingly sophisticated. As quickly as card user safeguards are designed, fraudsters find ways to subvert them. They’re exploiting weaknesses in two-factor and multi-factor authentication systems and using social engineering techniques such as phishing and smishing attacks to obtain authentication details and then pretexting to trick users into providing their payment tokens or other secure information.

“In the past, we could trust that payments were secure when they were done with these secure methods or tokens,” says Jukka-Pekka Kokkonen, Head of Fraud and Dispute at Nexi Group. “But now we are seeing customers give their identification and authentication methods to fraudsters, and then we have very limited methods to stop the fraud."

This is a growing global challenge. Fraudsters are continually evolving their tactics, so banks and payment service providers (PSPs) like Nets must also adapt their responses to more accurately pinpoint unusual transactions.

Stopping fraud in mere seconds

Banks and PSPs get less than the blink of an eye to stop fraudulent transactions and protect customers.

“The speed of change, the attack vectors and fraud patterns are changing more often than in the past, and that can be a challenge,” Kokkonen explains. “So we are using new data points: We’re using 3DS data, we are looking into crypto data and we are trying to find token data. With SAS Fraud Management, we can process massive amounts of data to identify unusual patterns and sift the fraudulent transactions from the authentic ones – all in real time.”

With SAS, Nets simplifies data integration, enabling it to integrate its own internal data with that of banks as well as third parties to create better predictive modeling. The data is collected in a single solution to give Nets the agility to respond faster to new threats as they arise.

“Because of the nature of this battle, it’s critical to constantly monitor fraud detection performance,” Kokkonen says. “The SAS solution provides a wealth of up-to-date information about the performance of our fraud defenses and allows us to adapt as needed to battle changing threats in different regions of the world.”

Nets is using these adaptive, real-time fraud detection systems for payment cards, educating customers on the perils of sharing authentication credentials and communicating in real time with customers to help them avoid fraud attempts.

“Issuers can also help themselves – for instance, when they’re doing token enrollments, they should monitor for recognizable patterns such as duplicate phone numbers across accounts,” Kokkonen explains. “We are helping our customers recognize those discrepancies and run other fraud-prevention applications in real time using SAS Fraud Management.”

Cumulatively, these efforts are helping Nets protect customers.

The lowest fraud levels in Europe

Nets and SAS have a long-standing relationship in the Nordics that has gained record results.

“In Denmark, our joint fraud skills and competencies combined with the real-time fraud platform has led to the development of the best-performing fraud models delivering the lowest fraud levels in Europe,” Folling says. “In Q2 of 2021, the levels were at 0.2 basis point on domestic cards and 0.6 basis point on international cards according to The Danish central bank official statistics – that is a third of the level of the same quarter in 2016.”

Nets and SAS are directly reducing the card fraud losses in the issuing banks while also preventing losses, anguish and inconvenience for cardholders.

Folling attributes the results partially to the centralized approach. With governance and oversight of fraud centralized in SAS Fraud Management, tasks are much more efficiently carried out. Fraud modeling is faster, the false positive KPIs are improved, and it is easier to search and do individual reporting.

The system also allows fraud teams to define and correct errors as well as implement new fraud rules and scenarios and changes for several customer banks at once. This saves the banks a lot of resources, but still supports multitenancy and individual flexibility, allowing for individual tailoring for each client’s specific needs.

Nets and SAS’ partnership is expanding across Europe through Nexi, supporting financial crime prevention across the region.

“The digitalization of payments across Europe has accelerated wildly during and in the wake of the COVID-19 pandemic,” Folling says. “Banks and merchants are fully aware that they need to step up their fraud prevention, and Nets can offer just that through our Fraud and Dispute Services, which has SAS Fraud Management at its core.”