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It Takes Two: Artificial Intelligence and Human Insight Join Forces to Better Combat Fraud

posted on: Thu Mar 19 2015

Some things are just better together: peanut butter and jelly. Sherlock and Watson. Hall and Oates. These dynamic duos have demonstrated that the right pairing can yield better results – and the same applies to fraud solutions with the powerful combination of Artificial Intelligence (AI) and human insight.

Artificial Intelligence and Human InsightMaking headlines most recently for everything from “summoning the demon” to starring in the next summer blockbuster, AI has become the latest buzzword, and it is anticipated that it will transform everything we do. It’s certainly not new – but AI has made great strides in the last decade across many industries, especially as a solution for combatting fraud.

Fraud rapidly evolves, with tactics used by fraudsters becoming more sophisticated every day with the emergence of mobile and online channels. Given its capacity for deep learning, AI can process massive sets of data being generated in payment channels in milliseconds, exploit the “network effect”, and find patterns within a defined frame of reference to identify the complexities of fraud in real-time. It can automatically detect new scenarios used by fraudsters, producing results without training.

But a smart machine isn’t enough. AI can assess the likelihood of risk and detect patterns, but in order to maximize AI – and ensure that a fraud solution is tailored to the business it serves – competitive reasoning is needed. Merchants don’t just want to stop fraud – they want to approve the maximum number of orders while mitigating fraud. You can eliminate 100 percent of fraud by eliminating 100 percent of all orders, but that’s not going to help boost sales or keep you in business. The blend of AI and human touch offers a fraud solution that customizes results based not merely on broad-based principles or a “set it and forget it” mentality, but meets and evolves to the unique needs of each business.

Human insight enhances and enables all that AI can do by taking what the machine has processed and evaluating cases that are of importance. While humans cannot match AI in amount of data or speed it can compute, they can recognize the “large frame” circumstances in which the business operates. Human insight can adapt to the emotional side of fraud by understanding a fraudster’s motives and strategies. Humans can also predict what fraudsters may do when the core business strategy changes, without having to wait for fraudsters to attack and generate negative data. New business circumstance (product, market, pricing, etc.) can dramatically change the characteristic of your business, and those changes require real-time adaption.

Merchants aren’t fraud experts, and AI alone can’t provide explanations or reasoning to the fraud it detects like humans can. In order to clear the good orders, humans need to have that final say to make sure the customer experience is preserved. Kount has employed both since 2007, refining an optimal strategy for maximizing AI and helping merchants control the balance between fraud prevention and order approval. The numbers don’t lie: fraud rates are kept well below one percent and transactions completed in less than 300 milliseconds.

To learn more about how AI and human insight can mitigate and predict fraud, check out Kount’s eBook Two Heads Are Better Than One: AI + Human Insight.