GenAI is a double-edged sword in the world of e-commerce and digital payments, and businesses cannot sit and wait at the sidelines in addressing the concerns.
Omnichannel commerce and businesses do recognize they must take extra measures to protect payment systems, according to a recent payments trends report from Global Payments.
One of the key drivers for both business growth and e-commerce fraud is generative AI. While it has given businesses the power to identify and defend against attacks in real time, fraudsters use this same technology in increasingly sophisticated ways.
Rules and best practices on using AI responsibly are being written every day, but they don’t matter to cybercriminals. It’s a ‘spy vs. spy’ world in the e-commerce world – where the tools get sharper, the stakes get higher, and businesses can’t afford to sit on the sidelines.
CybersecAsia raised these concerns to Konrad Chan, President, Asia Pacific, Global Payments, for some insights and practical ways to leverage the opportunities while mitigating the risks that genAI brings to digital payments and e-commerce.
According to Global Payments’ 2024 Commerce and Payment Trends Report, 62% of businesses say reducing payment fraud is an urgent concern. What trends do you think will define Asia Pacific e-commerce and payments in the second half of 2024?
Konrad Chan (KC): Asia Pacific is undergoing rapid transformation in commerce and payments due to the swift adaptation of emerging technologies by businesses, consumers, and regulators. Here are five key trends we anticipate will shape the industry in the rest of 2024:
AI as a business growth driver: Artificial intelligence is increasingly becoming integral to business operations. It underpins significant industry changes, such as AI-powered biometrics that streamline checkout processes and AI-enhanced API integrations that boost efficiency. AI also significantly enhances the precision of fraud detection.
Rise of embedded payments: Embedded payments are gaining traction across various industries, including healthcare and real estate. By integrating payment solutions into their online platforms, businesses can create seamless, one-stop payment gateways. This integration helps in reducing payment errors and simplifying reconciliation processes, making embedded payments a major trend this year.
Enhanced security measures against evolving threats: As new security threats emerge, advanced measures are essential to protect both consumers and businesses. Digital, mobile, and social commerce channels aim to reduce friction for consumers, but they also open up more opportunities for fraud, identity theft, and other criminal activities. However, businesses can defend themselves by leveraging new technologies, and industry leaders are actively implementing these tools to enhance security.
Live commerce goes global: Live commerce, which started in China, is gaining international popularity. This trend involves shoppers interacting with live hosts and making real-time purchases, addressing one of the biggest issues of abandoned shopping carts to drive higher sales and engagement.
Next–gen digital experience: New technologies like autonomous checkouts, phone-to-phone contactless payments, and gamified payments are transforming the payment experience. These innovations not only reduce transaction friction but also enhance customer engagement and enjoyment, paving the way for future sales.
In what way is generative AI in payments a double-edged sword?
KC: From AI to generative AI, we have witnessed the beginning of a new era. While businesses – including Global Payments – have been using AI for years, generative AI is an entirely new type of technology.
Generative AI presents both opportunities and risks to the payment industry. On one hand, this transformative technology can enhance system efficiency, boost customer support, and provide personalized services with less friction. Businesses can improve fraud detection with AI through advanced data analysis and predictive capabilities.
However, the other side of the coin is that cybercriminals can also use the technology to create sophisticated schemes, making fraud detection ever more challenging. The industry should leverage the strengths of AI to create a more secure environment while protecting against its potential risks, ultimately reducing the likelihood and impact of payment fraud.
What can organizations do to leverage the opportunities while mitigating the risks posed by AI?
KC: To leverage the opportunities while mitigating the risks of AI, businesses should adopt a multi-faceted approach:
- Anti-fraud Solution: Machine learning can be leveraged by the payments industry to improve fraud detection and prevention. By combining machine learning with consumer behavioral data, companies are able to develop predictive models that focus on consumers’ typical purchase behaviors and isolate suspicious patterns. It allows businesses to learn fraudulent behavior and take a proactive approach in fighting against cyberattacks.
- Continuous Monitoring and Updating: Businesses should regularly monitor and update their infrastructure systems to address new types of fraud and ensure they adapt to evolving data leak and cyberattacks threats.
- Ethical AI Practices: Over-reliance on AI can lead to vulnerabilities if the systems are not properly managed or there are biases in the AI models. Businesses should develop and enforce ethical guidelines to ensure the technology is used responsibly, minimizing biases and ensuring transparency in decision-making processes.
- Human-AI Collaboration: Combining AI with human oversight can achieve the best of both worlds. Human expertise should not be disregarded as our insights can support the validation of AI-generated outcomes and provide contextual understanding that AI might lack.
- Education and Training: Businesses can invest in training sessions for employees to understand and manage AI tools effectively, and to recognize AI-generated fraud attempts.
- Regulatory Compliance: As regulations tighten, it is important for businesses to be well-informed of regulatory developments and ensure that AI implementations comply with relevant laws and standards to protect customer data and maintain trust.
How can businesses more safely navigate the ‘spy versus spy’ world of payment fraud?
KC: Navigating the complex landscape of payment fraud has been challenging, especially with the rising presence of emerging technologies such as AI. The regulation of AI has been one of the top discussion topics among global leaders and Big Tech. Policies, practices, and frameworks can support the ethical use of AI.
Meanwhile, fraudsters, who are not constrained by these rules, are freely exploiting the benefits of AI for malicious purposes. Given the current ‘spy versus spy’ world, where exploitation tools get increasingly better and business risks get higher, businesses are encouraged to adopt a proactive approach to fight fraud and utilize available tools to protect themselves:
- Multi-factor Authentication (MFA): Asking consumers to use more than one form of authentication to accurately verify their identity can be extremely effective in blocking most automated cyberattacks.
- Encryption By encrypting information while it is transferred from one system or device to another, businesses can prevent fraudsters from accessing data or corrupting files.
- Network Tokenization: This process replaces sensitive card information with tokens, enhancing the security of digital payments. Tokenization not only protects card data but also improves payment processes, increases approval rates, and lowers transaction costs, leading to better conversion rates and higher revenue.
- Behavioral Biometrics: Behavioral analytics can support businesses in understanding normal user behavior and quickly identify deviations that may indicate fraud.
