Addressing Concerns with Faster Payments: The Role of Artificial Intelligence in Mitigating Fraud

One of the primary concerns regarding faster payment systems is the heightened risk of fraud, yet artificial intelligence (AI) can play a crucial role in addressing these issues.

A study by the Bank for International Settlements (BIS) and the Bank of England explored AI’s capability to
detect sophisticated fraudulent activities
carried out by cybercriminals.

The experiments were conducted using simulated data derived from millions of bank accounts and transactions, mirroring real-time retail payment scenarios.

Known as Project Hertha, the study revealed that AI models are highly effective in fraud detection. BIS reported a 26% greater efficacy of AI over traditional fraud protection methods at identifying suspicious activities.

Furthermore, AI analytics assisted financial institutions in uncovering an additional 12% of fraudulent accounts beyond what they could have identified without such tools.

A Powerful Evolution

The potent role of AI in fraud prevention was highlighted by findings from FIS, which indicated that 78% of respondents saw a
marked improvement in their company’s fraud detection and risk management strategies
due to the use of AI.

Nearly half of business and tech leaders surveyed planned to increase their investment in AI over the next two years, with many intending to delegate more complex tasks to these advanced systems.

A notable evolution of AI is agentic AI, where AI agents can operate autonomously. Despite this technology’s potential as a robust fraud deterrent, many experts consider it
a double-edged sword
.

Research from SailPoint revealed that 96% of tech professionals view AI agents as growing security threats. However, nearly all respondents anticipated expanding their use of agentic AI in the coming year.

A Supplement, Not a Solution

As organizations integrate AI into their operations, cybercriminals have already begun deploying both generative and agentic AI at scale. These criminals use these technologies for various fraudulent activities, including deepfakes and ransomware attacks.

One of the primary reasons behind this significant advantage for cybercriminals is that they are not constrained by privacy or reputation concerns.

While Project Hertha demonstrated AI’s potency in fraud detection, there remain limitations such as potential errors in identifying fraud instances and generating false positives.

BIS concluded that AI should be regarded as a supplement to existing fraud defenses rather than a comprehensive solution. Organizations must continue to
innovate and think outside the box
to counter cybercriminals who have achieved a substantial lead in these areas.