Nine of the UK’s biggest banks are adopting AI tools to tackle scams

• Mastercard is selling a new AI-powered tool to detect fraud transactions.
• The tools could save UK’s banks about £100 million annually if rolled out across the industry.

Last month, the economic regulator for the payment systems industry in the UK, Payment Systems Regulator (PSR), made it mandatory for banks and payment firms to reimburse victims of online bank fraud within five days. The rules, a loss to banks, are designed to ensure more consumers will get a refund if they fall victim to a phenomenon known as authorized push payment fraud. In turn, Mastercard is selling an AI tool to protect the banks.

The ‘Consumer Fraud Risk’ solution, now live in the UK, has been adopted by nine of the biggest British banks, including Lloyds Banking Group Plc, Natwest Group Plc, and Bank of Scotland Plc, Mastercard said in its statement. “Leveraging Mastercard’s latest AI capabilities and its unique network view of account-to-account payments, it is helping banks predict and prevent payments to scams of all types,” it added.

The payment-processing corporation uses large-scale payment data to help identify real-time payment scams before funds leave a victim’s account. To give an idea of the severity of scams in the UK, Fraud is now apparently the most common crime in the UK, with one in 15 people falling victim.

In 2022, people in the UK lost £1.2 billion to fraud, the equivalent of £2,300 every minute, according to bank industry group UK Finance. The most common type of fraud after card fraud was scams involving purchases. That is why the UK government is getting tougher on scams as part of a national strategy. 

As for the ‘authorized push payment’ or APP fraud, it accounts for 40% of UK bank fraud losses, and estimates predict it could cost $4.6 billion in the US and UK alone by 2026, Mastercard’s data shows. Last year alone, within the UK, 207,372 incidents of APP scams were reported, with gross losses of £485 million.

How is Mastercard using AI to help UK banks?

According to Mastercard, organized criminals move ‘scammed’ funds through a series of ‘mule’ accounts to disguise them. To counter this, Mastercard, for the past five years, has worked with UK banks to follow the flow of funds through these accounts and then close them down. 

“Based on insights from this tracing activity and overlaying them with specific analysis factors such as account names, payment values, payer and payee history, and the payee’s links to accounts associated with scams – Mastercard’s AI solution provides banks with the intelligence necessary to intervene in real-time and stop a payment before funds are lost,” the payment card network processor said.

TSB Bank is one of the first banks to adopt Mastercard’s Consumer Fraud Risk Tool. “The bank says it has dramatically increased its fraud detection in just four months. Based on TSB’s results, the amount of scam payments prevented over a year would equate to almost £100m saved across the UK, should all banks mirror their performance,” Mastercard shared. 

What about banks with AI tools in Southeast Asia?

Over the recent years, AI’s role in fraud detection has grown increasingly pivotal, fostering a safer and more secure financial ecosystem. Regarding Mastercard, the company is assessing other international markets to scale the solution. Having been using AI for the last decade, Mastercard said its AI-powered cybersecurity solutions alone had stopped over $35 billion in fraud losses in the previous three years.

In Southeast Asia, an example of AI’s impact is in DBS Bank, Singapore’s largest financial institution. The bank employs AI to reduce false positives and prioritize alerts. This strategy enables analysts to dedicate more time to higher-risk activities, optimizing their efforts. DBS leverages AI programs to gather and process vast amounts of bank data necessary for making informed decisions on alerts.

Since banking institutions are all too aware of the downsides of not investing in AI capabilities, AI adoption in finance will steadily accelerate in various applications, from fraud detection and risk management to personal finance and financial advice.

---

---

---