The Role of AI in ID Verification & Fraud Prevention

How AI is powering fraud prevention and ID verification
As fraud rates rise to unprecedented levels, with malicious players equipped with the latest technologies, we look at how AI can turn the tide

Identity fraud rates in fintech rose a staggering 73% between 2021-2023, according to Sumsub’s Identity Fraud Report. The numbers are concerning, but what are they rising? 

Just as new technologies are emerging to support innovation in the industry – like Gen AI – fraudsters can leverage the same tools for malicious aims.

Research undertaken by ComplyAdvantage has identified the criminal use of AI as one of the most serious emerging fraud challenges. 

66% of financial industry professionals believe AI’s use by fraudsters represents a distinct possibility for cyber attacks to scale markedly, with modern risks including deepfakes and the use of Gen AI to create malware. 

Speaking to us at Money20/20 USA in 2023, Jumio’s Chief of Digital Identity Philipp Pointer tells us: “Fraudsters have been evolving a lot over the last two years. We've seen a lot more activity and sophistication, so obviously we need to keep up with that and find new techniques to fight them.”

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AU10TIX Chief Business Development Officer, Ofer Friedman, went one step further: "I wouldn't be surprised if some of those people creating the fraud have worked for companies who are doing fraud detection, because, when we detect it, you can see them reading the minds of those trying to protect against it.”

The issue of fraud is stark and continues to grow. It spreads across multiple industries and is particularly rife in secondhand marketplaces. 

Consumer group Which? released a recent survey of 1,300 buyers, finding that 32% of respondents were scammed on secondhand marketplaces from January 2022 to January 2023. 

Another report from Adyen found that 35% of retail businesses in the UK have been a victim of a cyberattack or data link in the past year alone. 

To combat the rising tide of fraud, some 86% of banks and financial institutions (FIs) surveyed by ComplyAdvantage are committed to investing in new technologies, to combat the rising sophistication of fraudulent activity.

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Finserv investment in ID verification & fraud prevention

In the opening months of 2024 alone, a string of new product launches from across the industry have been announced to further protect against fraud and enhance ID verification. 

Just as fraudsters are leveraging Gen AI capabilities to further the scope of malicious activities, so too are financial services providers, FIs and fintechs using Gen AI to power anti-fraud solutions. 

A prime example is the new Visa Account Attack Intelligence (VAAI) Score solution, introduced by leading payments processor Visa to help identify the likelihood of enumeration attacks in card-not-present transactions.

With Visa’s reach extensive, its new solution, announced in May 2024, has started to cut down on the 33% of enumerated accounts that have experienced fraud within the first five days of a fraudster gaining access to payments information.

Mastercard has also launched Decision Intelligence Pro, an upgrade to its existing Decision Intelligence solution. This transaction risk tool assesses the relationships between multiple entities surrounding a particular transaction.

Visa and Mastercard are not the only leading financial services providers to scale their anti-fraud efforts. Leading UK-based neobank Revolut has launched an advanced AI scam detection feature to protect consumers from card scams at the point when they are being scammed. This breaks the ‘spell’ of the scammer before money can be sent to the criminal.

So, while AI enables fraudsters to scale their malicious activities, financial leaders are also using the same tools to combat the rising tide of fraud, to keep on top of the latest in ID verification and protection against fraud. 

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