Nets banks on sophisticated analytics

Aim to stop credit card fraud before it happens

Senior Vice President for Fraud & Dispute, Operations at Nets Denmark

WHEN NETS IN 2011 DEVELOPED A NEW FRAUD STRATEGY, the leading Nordic payment service provider decided to upgrade its services related to fraud management within card pay-ments. Criminals conducting payment card fraud today are getting more and more advanced, and this challenges Nets to keep staying a couple of steps ahead of them all the time.

“The Nordics is the most developed marketplace in the world when it comes to card purchases. Anything that impacts card payments has a huge societal impact and this is Nets’ strategic con-text. We serve as the infrastructure for payments for roughly 250 banks in the Nordics and Baltics, and it has been paramount for us that we were able to launch a real-time fraud detection system,” says Mikko Pilkama, Senior Vice President, Issuing Services at Nets.

Historically, the detection of fraudulent payment card transactions required individual attention from an internal fraud expert at near real time. However, before an alert was generated and investigated, the transaction would already be completed and perhaps followed by several more. The losses to individual accounts from card theft or other types of misuse could be significant before a card was blocked. Nets wanted to be able to do more at an earlier stage of abuse.

“We decided that we needed to go from a reactive stance on fraud to a proactive approach. Our new fraud prevention system enables us to proactively prevent fraud from taking place – by stopping suspicious transactions before they are processed – instead of being reactive once the transactions have been processed. This improves our ability to limit the card fraud impacting the banks and improve the cardholder experience,” says Kaspar Kock Kristensen, Senior Vice President for Fraud & Dispute Operations at Nets Denmark. He joined Nets at the beginning of the project and has since then been involved in developing the fraud area.

A young man performs aerial yoga on a terrace
We needed to go from a reactive stance on fraud to a proactive approach.

Neural mapping enhances the fraud prevention

Nets put out a Request for Proposal (RFP) in 2012 to fraud detection software vendors. After surveying the bids, the choice fell on SAS Institute.

Kaspar Kock Kristensen points specifically to the ability of SAS’ analytical software to map emerging fraud patterns utilising the neural networks as a deciding factor in winning the bid for Nets’ business. Another important element was SAS Institute’s dedication to build new capabilities into its standard systems in order to support Nets’ strategic needs. Nets is the first provider of payment services to procure this type of solution from SAS Institute and thus, the development of the systems became a front runner project in both the Nordic countries and in the US.

“Starting in early 2013, we worked closely with a SAS Institute team out of San Diego in the US, who was extremely dedicated to creating the best solutions for a payment processor such as ourselves. Approximately one year later, the project was delivered on schedule,” says Kaspar Kock Kristensen.

In January 2014, the solution went live after an intensive project effort of models development, coding and software implementation. After more than a year in operation, the results are evident. “We have gained a 25-40% reduction of fraud on the card products running on the fraud prevention service and improved the customer experience,” says Kaspar Kock Kristensen.

The system provides detail statistics on system and agent performance, which Nets uses very actively to optimise performance (e.g. detect more fraud and reduce the number of alerts on genuine cardholder spending).

Kaspar Kristensen Kock Nets executive photo
We believe that keeping a strong edge on fraud detection and other value-added services to our customers, is a key element to our future success.

- Kaspar Kock Kristensen, Senior Vice President for Fraud & Dispute, Operations at Nets Denmark

Helping banks create more loyal customers

However, Nets has greater ambitions for the new analytical framework. The insights derived from the data sets in Nets´ systems are a fertile playground for operational excellence as well as further business development in digitalised card payments according to Mikko Pilkama.

“The payment landscape is changing rapidly – new payment types and new players in the market are constantly emerging: We see e.g. Apple as well as Internet service players investing heavily in payment, and consumers are rapidly increasing their share of payments over the Internet.
Nets needs to stay relevant in the future of payments and provide relevant services as the market develops. We believe that keeping a strong edge on fraud detection and other value-added services to our customers, is a key element to our future success.”

Kaspar Kock Kristensen strongly seconds that outlook and points out that the speed of reaction and the eventual ability to predict future fraud methods and patterns will be a determining factor. “For our clients, the banks, customer service is increasingly becoming the competitive factor. We can help our clients detect patterns of both use and abuse by tuning our analytic systems to look at other factors than purely monetary information. In the future, we will be able to apply actual behavioral patterns into our fraud intelligence and thereby prevent even more card fraud and improve the cardholder experience,” says Kasper Kock Kristensen.

To achieve this, Nets is banking on a continued collaborative business innovation process with SAS Institute.

“Our companies share in seeing the changes and the benefits of a mutual business development partnership. Fraud is a great stepping stone for future applications like data analytics as the payment market develops,” Mikko Pilkama concludes.  

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