This article is provided by BRC Associate Member Axerve.

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Ecommerce has long been on an upward growth trajectory and seen an incredible boom during the last two years as a result of the global lockdowns. The wave of ecommerce growth in recent years has unfortunately been matched with a less positive undercurrent: a rise in ecommerce fraud that has a significant impact on merchants and consumers alike.

As the ecommerce ecosystem has grown in terms of customers, businesses and diverse payment methods, so too has online fraud, not only in terms of volume but also the complexity of the threats. While over the decades the solutions to protect buyers and sellers have multiplied and evolved, cybercrime continues to hamper the development of ecommerce due to the increasingly sophisticated tools available to those who commit illicit acts.

Ecommerce fraud costs the industry $21 billion per year, as reported to Axerve by ecommerce fraud management partner Riskified in 2020. Out of that $21 billion, $15 billion is lost due to a fear of fraud. Similarly, the fact that 26% of European consumers declared that they had suffered at least one fraud as a consumer according to February 2021, European Agency for Fundamental Rights (FRA) data, serves to vindicate lingering customer apprehension.

The advent of AI solutions and machine learning in payments is a sea change in the fight against fraud and cybercrime in ecommerce payments.

Payments orchestration: a chance to increase security

Payments orchestration is a growing sector which will reach almost 1.5 billion dollars in revenues by the end of 2026 according to Global Market Estimates.

In the context of ecommerce and online fraud; payment orchestration platforms will be at the vanguard of fighting ecommerce cybercrime as such platforms are in a unique position to collect data and provide a homogeneous and complete view of transactions allowing for analysis that contributes to fraud prevention activities. By collecting payment data on the same platform with integration of different service providers and fraud detection and prevention solutions the platforms can help make payment processing highly secure, ultimately reducing the number of frauds suffered and the number of false positives in transactions.

With AI and ‘smart routing’, payment orchestration platforms can direct payments to the ideal acquirer for a specific transaction or to a specific fraud prevention platform, even ones not necessarily offered by the PSPs a merchant usually relies on, and so orchestration platforms are not limited to one payment provider, but automatically determine the best performing gateway taking into consideration security and other relevant factors. Payment orchestration platforms facilitate the coordination of all collections which is a key step in overcoming digital threats as it is a central hub for managing a complex set of collection flows from different sources and payment methods.

Smart routing is created via AI and machine learning which improves continually to determine the best placed gateway with increasing success. This is as when AI is coupled with payment orchestration, it has access to a significant pool of data and can consider a diverse set of risk markers and a number of parameters instantly to flag risky transactions to merchants before they take place stopping authentication.  Due to machine learning the data gathered on each transaction then improves the algorithm.

In a constantly changing and fragmented payments landscape, payment orchestration platforms fill a void created by the lack of global standards for cross border payments, as well as providing a uniform and clear view on the collection data, managed by an ever-increasing number of platforms and payment methods. This overview provides strong means to support the collection and analysis of data coming from multiple sources and real-time analytics tools, as well as strategic components for optimising fraud prevention activities.

AI: sea change in crime prevention

Artificial Intelligence and machine learning are tools that can actively contribute to countering the increasingly sophisticated cyber threats. When these technologies are coupled with the young but rapidly maturing payment orchestration sector, crucially AI has the ability to combat cybercrime in brand new ways that are yet to be mass adopted.

For instance, smart routing is something that wasn’t used before because payment providers, and payment partners, have historically only used their own payment gateways, whereas payment orchestration uses a range of different payment gateways from different payment service providers. So, it’s an emerging field that broadens the possibilities for processing of transactions.

Axerve Guaranteed Payments uses AI to assist merchants with fraud prevention and has introduced a solution based on AI and machine learning that is fully integrated with the online payments gateway. It leverages Riskified’s transaction risk analysis coupled with its own data. This elastic linking allows for the benefits of data enrichment to be harnessed; transaction information such as amount, and geography can be considered alongside data on the end-customers typical spending behavior to make sure that the transaction is safe. Moreover, powered by cost effective machine learning that cuts fees, without latency the AI takes into account a huge world of authorisations and parameters to find the best gateway.

AI and payments orchestration dovetail to create a unique offering with advantages that cannot be easily replicated. This is as payment orchestration deals with multiple payments types, and due to the fact that they are all integrated, the linked AI gains more experience than any individual platform and benefits from having the broadest exposure to examples of attempted fraud and what markers to assess becoming the smartest and most friction-free tool in fighting cybercrime for end-users.

To further analyze online fraud and look at the possible solutions to cybercrime statistics have a look at Axerve’s whitepaper on online fraud, which can be downloaded for free at this link.