This AI-based Business Is Taking Down Fraud In E-commerce With AI

This AI-based Business Is Taking Down Fraud In E-commerce With AI
Retail

Using machine learning to paint a better picture behind every transaction, Forter is banking on AI as the road to a fraud-less e-commerce ecosystem

Ido Lechner, Home Editor
  • 20 july 2017

Its no secret that e-commerce has largely disrupted how we think of retail, stealing the spotlight from brick and mortar storefronts by making everything available at the touch of a button. And while our increasingly digital purchasing habits have made our lives significantly easier, shifting the landscape from ‘hunter gatherer’ mode to ‘everything now comes to me’ mode, the modern day means of transaction are not without their own sets of fault.


In a world where you can make purchases without ever standing face to face with a merchant, anonymity can often degenerate into fraudulent activity. With consumers losing upwards of $16billion to fraud and identity theft last year alone according to CNBC, its difficult not to feel vulnerable. Yet, businesses are even more at risk than their customers when it comes to this type of activity.

“Every time a transaction happens online with a stolen card, the liability (and therefore the risk) is actually on the retailer, not on the consumer. They can call the bank and get reimbursed. It’s ultimately the merchant that’s both not getting paid and actually even getting fined. If it happens frequently, their merchant status gets terminated. They are then forced into this world of anti-fraud by default. This can get costly, and they have to buy a lot of data to address the issue” says Michael Reitblat, CEO and co-founder of Forter, a company that blends human creativity and experience with its machine-learning platform to accurately detect and filter out fraud for top retailers across the globe.

The company was first conceived after Reitblat tried to place an order to Israel from the U.S., but was rejected when his account was flagged for the disparity between his billing and shipping addresses. After faking his address through e-commerce savviness, and realizing that neither ends of the trade were innately at fault for his initial transaction failure, he realized a wonderful business opportunity to streamline the checkout experience while maintaining (and even fortifying) corporate defense against hackers and card thieves.

Unlike other fraud-security companies, whose traditional AVS (address verification system) method of determining stolen credit card or fake account information proves imprecise, Forter’s proprietary DaaS (‘Decision as a Service’) solution is so accurate that the company promises a full fraud chargeback guarantee for any fraudulent purchases that might’ve slipped through the cracks.

“Merchants lose a cumulative total of $4billion just by having to refund purchases they’ve already shipped; in other words, an average of 1.5% of all sales a company makes prove to be fraudulent, which is huge when you consider the sheer scale of competitive e-commerce. Worse yet, because the largest of companies tend to be more conservative when approaching this subject, they collectively turn away over $20billion worth of ‘suspicious’ yet actually genuine transactions” adds Reitblat.

At Forter, the company’s system operates under an ‘innocent unless proven guilty’ model, which translates to higher card approval rates and frictionless checkouts unburdened by the uncertainty of fraud. The ultimate answer to fraudulent activity, in Reitblat’s eyes, isn’t to go for quantity—in essence removing massive chunks of shady-yet-possibly-real transactions—but to go for quality instead—that is, the precision in which you’re able to spot and eliminate fake purchasing. With artificial intelligence at the helm, the vision for fraud-free e-commerce is realizable in as little as two years by Michael Reitblat’s estimate.

“The main advantage of our system is that we generate more data. We’re looking into what people buy prior to a transaction on a site that we protect. We look at their various online behaviors. If you’re like my dad for instance, you’ll look up 5 websites to compare and contrast product prices and quality, before ultimately waiting for a discount to strike. If you’re like me on the other hand, you’re too busy to deeply consider what you’re buying, and you just buy the first thing you see,” says Reitblat. “Every transaction connects dots that can tell the real story behind a network of 5000 other data points generated by those transactions. The only way to construct this [understanding] is through the combination of data science looking through a history of billions of transactions, understanding cultures and a lot of complex algorithms.”

And of course, since Forter uses machine-learning to stay ahead of the fraudsters, the platform is perpetually optimizing itself with every decision it makes—of which there are millions. Mixed with all of the openly supplied information that retailers normally wouldn’t share with each other, the company has created the essential end-to-end fraud protection infrastructure already employed by the likes of James Allen, fiverr and delivery.com (among many others).

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According to a recent case study, companies that use Forter’s solutions see an average of 229% increase in ROI, 7.8% increase in approvals for high products (from 90% to a rounded 97%), 8.2% increase in approval for standard value products (from 85% to a rounded 92%), and more less than 1% cases for false positives. The accompany attributes the impressive ROI on four central elements: total transactions and approvals grow with Forter at one’s side, the automated solution makes for better scalability and expansion into new markets, improved overall customer satisfaction with better retention and sales, and reduced costs due to chargebacks and employee time spent on annual transaction reviews.

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“At the end of the day, what we’re doing is understanding who the person is and whether or not they have malicious intent, or ‘good but suspicious’ intent,” says Reitblat.

Forter

Its no secret that e-commerce has largely disrupted how we think of retail, stealing the spotlight from brick and mortar storefronts by making everything available at the touch of a button. And while our increasingly digital purchasing habits have made our lives significantly easier, shifting the landscape from ‘hunter gatherer’ mode to ‘everything now comes to me’ mode, the modern day means of transaction are not without their own sets of fault.

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+e-commerce
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+retail
+technology

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