Fighting Fraud: Capital One, Adyen and Stripe Share Data

Capital One has recently announced a new partnership with powerhouses Adyen and Stripe. 

The collaboration aims to tackle the growing threat of fraud by introducing a free, open-source solution called Direct Data Share (DDS). This initiative is designed to enhance real-time authorisation decisions, thereby reducing fraud losses and false declines for merchants.

The timing of this partnership is crucial. Global fraud losses are projected to escalate to a staggering $343 billion by 2027. Fraudulent activities and declines not only result in significant financial losses but also harm the reputation and customer trust of affected merchants. Capital One's DDS solution has already demonstrated its potential, enabling over US$1bn in merchant transactions that would have otherwise been lost.

Jon Borman, Capital One Head of Fraud Strategy says that the partnering with the fintechs has resulted in the approval of over a billion dollars’ worth of transactions that would have been declined:  “They’re trying to stop fraud on their side, too, both for financial reasons, as well because this is criminal activity that we’re preventing,” he said of the partnership.

“So we had this light bulb moment in that we realised we have the exact same business model, so we can work together and fight fraud.”

How Direct Data Share Works

DDS is a game-changer for the industry. By making its Direct Data Share API available to both Adyen and Stripe, Capital One is creating a robust network to identify and block fraudulent transactions across multiple platforms. For instance, if Capital One detects fraud at a Stripe merchant and notices the same IP address attempting a transaction at an Adyen merchant, the system can block that transaction in real-time. By sharing evidence of good customer history, the API helps prevent false declines, ensuring legitimate transactions are not mistakenly blocked.

This partnership raises questions about Capital One's intentions regarding its Discover network. The move indicates a commitment to building strong partnerships with acquirers and merchants. It signifies a shift towards a more collaborative and inclusive fraud prevention strategy.

“We love this partnership because we can succeed together,” adds Borman.  “Adyen’s merchants benefit from higher authorization rates and fewer chargebacks just as Capital One’s cardholders benefit from fewer false positive declines and less fraud.”

While the DDS initiative is a significant step forward, its long-term impact will depend on whether it extends beyond Capital One. If other financial institutions and networks adopt similar open-source APIs, the potential benefits could be immense, creating a more secure and seamless ecommerce environment for all. However, if DDS remains exclusive to Capital One, the opportunity for widespread fraud prevention could be limited.

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