Machine Learning Fraud Detection Systems Could Save Card Issuers and Banks $12bn Annually

Machine Learning Fraud Detection Systems Could Save Card Issuers and Banks $12bn Annually

CAMBRIDGE, England, July 21, 2016 /PRNewswire/ --

    Adaptive behavioural analytics software reduces 'genuine transactions declined' by
over 70% and incidence of undetected fraud by 25%

    Oakhall, the London based analysis firm, estimates that global financial services
firms could save at least $12 billion annually by employing adaptive, machine learning
fraud management systems according to a study published in conjunction with Featurespace.
For the full study see http://www.featurespace.co.uk/cost-of-card-fraud.

    By employing adaptive behavioural analytics software to both identify actual
fraudulent transactions, and reduce the number of 'genuine transactions declined' - as
well as reducing the costs associated with managing blocked customers - the industry could
reduce the $31 billion total annual cost of card fraud by over $12 billion annually.

    Featurespace is a world leader in adaptive behavioural analytics software. Its
services and products are employed in over 180 countries via a wide range of customers,
including the leading US payments processor, TSYS, as well as Vocalink/Zapp, William Hill
and Betfair.    

    Genuine transactions declined, also known as false positives, are legitimate
transactions that have been incorrectly blocked by existing fraud prevention systems,
which result in lost revenue and additional management costs to the card issuer.

    By using adaptive behavioural analytics software, card issuers can reduce genuine
transactions declined, improve operational efficiencies and lower the incidence of
undetected fraud, according to the Oakhall study. Working with banks and cards issuers,
Featurespace demonstrated a 25% reduction in the incidence of undetected fraud and,
simultaneously, a 70% reduction in genuine transactions declined, as well as a subsequent
reduction in call centre costs of 50%.

    Oakhall applied these results to industry data to estimate the implied savings for the
industry at $12.2bn, comprising $4.1bn reduced fraud and $8.1bn reduction of fraud
management costs and lost revenue.

    Jonathan Crossfield, Partner at Oakhall, said:  

    "Incumbent systems can block 10 legitimate transactions for every fraudulent one
identified and, with undetected fraud, cost the global card industry $31 billion in losses,
operational costs and revenue lost to competitors.  

    "A key benefit of adaptive fraud management systems is the much lower incidence of
genuine transactions declined, with the potential savings of $12 billion annually." 

    Martina King, Featurespace CEO, commented:

    "Having genuine transactions declined is extremely frustrating for consumers and
damages their relationship with the card issuer or bank. They also result in lost revenue
and substantial costs to the bank.  

    "Data-driven adaptive behavioural analytics - delivered via the ARIC engine - protects
bank revenues and substantially cuts operational costs from false fraud alerts. It also
helps the banks maintain positive relationships with their customers.  

    "The leading US payments processor, TSYS, chose to provide ARIC to its customers
because of ARIC's enhanced machine learning capabilities and decision-making around fraud
and genuine transaction activity." 

    Oakhall estimates that the total annual cost of card fraud to card issuers is $31
billion, of which $16.3 billion is associated with genuine incidents of card fraud,
according to The Nilson Report, which compiles statistics on the global payment industry,
and $14.7 billion are fraud-related costs associated with genuine transactions declined.

    Featurespace's advanced fraud management systems, that utilise deep machine learning
and adaptive behavioural analytics, understand the 'good' behaviour of each customer more
accurately and efficiently than fraud analysts, to reduce the losses and costs associated
with managing fraud.

    About Oakhall - http://www.oakhalladvisors.com

    London based Oakhall is a consultancy specialising in providing smart analysis and
articulation services to private and public companies. Founded by previously top-rated
equity research analysts, Oakhall has particular experience in the financial technology
sector and focuses on bringing an analytical approach to market sizing and valuation.

    About Featurespace - http://www.featurespace.co.uk

    Featurespace(TM) is the world-leader in Adaptive Behavioural Analytics and creator of
the ARIC(TM) engine, a machine learning software platform developed out of the University
of Cambridge.

    Head quartered in Cambridge, UK, Featurespace has deployed ARIC to organisations that
have services or products deployed in over 180 countries. Customers include Betfair,
Vocalink/Zapp, Camelot, William Hill, and TSYS, the largest third-party processor of Visa
(R) and MasterCard(R) credit cards in the U.S.

    The ARIC(TM) engine - a real-time, machine learning software platform - monitors
individual behaviours to catch new fraud attacks as they happen. The increased accuracy of
understanding customer behaviour simultaneously reduces the number of genuine customers
whose purchases and transactions are incorrectly declined.

            Enquiries: 

        Featurespace : +44-(0)1223-345921 
        Rebecca Amos, Head of Marketing 
        rebecca.amos@featurespace.co.uk      

        Oakhall : +44-(0)20-3393-0633 
        Jonathan Crossfield/Andrew Griffin     

        Instinctif Partners : +44-(0)20-7457-2020 
        Adrian Duffield/Chantal Woolcock       

     

Featurespace