Innovations in Fraud Strategy and Risk Management at Brightwell

Blog post about innovations in prepaid fraud strategy and risk management at Brightwell, a global payments technology company. A person holding a tablet with icons on it.

Welcome to the first edition of our monthly look into the heart of financial security and risk management at Brightwell. As the Director of Fraud Strategy and Risk, I am excited to present this series, where we will dive deep into the world of fraud detection and prevention. Our goal is to not only share our insights but also to reinforce our commitment to safeguarding our clients' interests.

In today's digital age, the convenience of online transactions is shadowed by the increasing threat of digital fraud.  With 2023 wrapping up, the need for awareness and vigilance in the digital fraud landscape has never been more critical. At Brightwell, our commitment to staying ahead of these emerging threats is unwavering, as we constantly innovate and adapt our strategies to safeguard the security and integrity of every transaction our clients make.  Our approach integrates cutting-edge technology with deep industry expertise to help identify and neutralize fraud risks before they impact our customers. By embracing a proactive and predictive stance, we not only respond to current fraud trends but also anticipate and prepare for future challenges. This unwavering focus helps ensure that our clients can conduct their financial operations with confidence, trusting in the robustness and resilience of our systems against the evolving threats of the digital world.

Evolving Trends in Credit Card Fraud

As the world of credit card fraud continues to evolve, we witness a dual phenomenon: established fraud tactics undergo sophisticated transformations, and entirely new schemes emerge. Here we delve into the top five fraud dynamics observed in 2023, mindful that understanding both the evolving nature of proven tactics and the emergence of new threats is crucial to maintaining robust defenses against these persistent challenges.

  • Advanced Skimming and Shimming Techniques:

Criminals use sophisticated skimming devices on ATMs and point-of-sale terminals to capture credit card information. Shimming, which specifically targets chip-based cards, involves inserting a thin device into a card reader to intercept data from the chip.  These methods are covert and can compromise a large number of cards before being detected, making them a significant threat to cardholders and financial institutions.

  • Exploitation of E-Commerce Platforms:

Globally, ecommerce losses are on course to reach $38 billion in 2023, and forecast to reach $91 billion by 2028.  Online platforms are increasingly targeted by fraudsters for credit card fraud.  They use stolen credentials to access accounts, make unauthorized purchases, or transfer funds.  This not only leads to direct financial losses but also undermines the security and trustworthiness of e-commerce platforms, impacting both merchants and customers.

  • Enumeration Attacks:

Globally, ecommerce losses are on course to reach $38 billion in 2023, and forecast to reach $91 billion by 2028. In these attacks, fraudsters use automated scripts to systematically guess and verify credit card numbers on websites.  This brute-force method leads to unauthorized transactions or data breaches.  The sheer volume of attempts increases the likelihood of finding valid card details, posing a significant risk to businesses and cardholders.

  • Card Not Present (CNP) Fraud:

With the rise in online transactions, CNP fraud has become more prevalent.  Here, stolen credit card information is used for online purchases where the physical card is not required. CNP fraud is challenging for businesses as it often leads to chargebacks, with the merchant bearing the financial loss.

  • Account Takeover:

Account takeover involves unauthorized access to a customer's credit card account, leading to fraudulent transactions or changes in account details.  Achieved through phishing, malware, or using stolen information, these takeovers can result in financial loss and significant damage to customer trust.  Effective countermeasures include robust security protocols like two-factor authentication and vigilant monitoring for suspicious activities.

These trends underscore the evolving nature of credit card fraud and highlight the need for advanced, proactive measures to protect against these sophisticated threats.

Staying Ahead of the Curve

Innovation in fraud detection and prevention is a continuous process at Brightwell. We invest in research and development to stay abreast of the latest fraud trends and technologies. Here are a few areas we’re focusing on:

Real-Time Fraud Detection: Enhanced Collaboration and Advanced Analytics

At Brightwell, our strategy for real-time fraud detection is a synergistic blend of real-time monitoring at our processor level and through our in-house Brightwell fraud systems. This approach leverages a combination of advanced analytics and tailored rules, forming a robust front against fraud.

Our processor's real-time monitoring capabilities are crucial in providing an immediate response to potential fraud.  This system operates continuously, scanning transactions as they occur for any signs of suspicious activity. It serves as a first line of defense, quickly identifying and flagging anomalies.

Simultaneously, our Brightwell fraud systems bring an additional layer of protection. These systems are equipped with advanced analytics that delve deeper into transaction patterns and behaviors. By analyzing vast amounts of data, our systems can detect subtle irregularities that might indicate fraudulent activity.

The integration of tailored rules into our system is key to our success in fraud detection. These rules are crafted based on historical data, emerging fraud trends, and insights from our fraud prevention and disputes team. They enable us to fine-tune our monitoring, ensuring that our detection methods are not only comprehensive but also specific to the unique threats we face.

This dual approach, combining processor-level monitoring with our advanced in-house systems and tailored rules, ensures a more dynamic and effective response to fraud.  It empowers us to detect and address fraudulent activities swiftly, significantly reducing the risk and impact on our clients.

Collaboration and Information Sharing: Enhancing Predictive Models with Visa and Mastercard

In our ongoing efforts to combat fraud, Brightwell places a strong emphasis on collaboration and information sharing, particularly with major financial networks like Visa and Mastercard.  This collaborative approach is not just about staying informed; it's about actively contributing to a more secure financial ecosystem.

Our strategy involves providing detailed fraud feedback to Visa and Mastercard.  This feedback is crucial as it encompasses real-world data and insights about attempted and actual fraudulent activities observed through our systems.  By sharing this information, we help these networks in enhancing their predictive fraud detection models.

Visa and Mastercard use this feedback to refine their algorithms, making their detection models more accurate and responsive.  This improvement in predictive capabilities benefits the entire financial community, as these enhanced models are better equipped to identify and prevent a broader range of fraudulent activities.

Furthermore, this collaboration creates a feedback loop that benefits all parties involved.  As Visa and Mastercard strengthen their models, we, in turn, gain from their improved detection capabilities.  This synergy ensures that our clients are protected not only by our in-house systems but also by the advanced fraud detection mechanisms employed by these global financial networks.

By working closely with Visa and Mastercard, we are not only reinforcing our defenses but are also playing a pivotal role in shaping more robust and intelligent fraud prevention strategies across the financial industry.

Employee Training and Awareness

At Brightwell, we believe that a well-informed workforce is our best defense against fraud.  Employee training and awareness are crucial components of our comprehensive fraud prevention strategy.  This approach encompasses regular educational sessions and updates on the latest fraud trends, techniques, and best practices in risk management.

Our training programs are designed for various departments, with the knowledge and tools they need to identify and respond to potential fraud. These sessions cover a wide range of topics, from basic principles of fraud detection to complex scenarios involving sophisticated schemes. By ensuring that our team is well-versed in these areas, we create an organizational culture that prioritizes security and risk awareness.

Within this framework, our disputes teams serve as a prime example of specialized training and awareness. Given their direct interaction with transaction disputes and potential fraud cases, these teams receive focused training that is tailored to their specific roles and responsibilities. Their insights and experiences in handling disputes are invaluable in identifying emerging fraud patterns and tactics.

The feedback and observations from the disputes teams are also instrumental in enhancing our overall fraud prevention measures.  By integrating their first-hand experiences with our broader strategies, we are able to refine our detection systems and response protocols.  This collaborative approach ensures that our defenses are continuously evolving, staying ahead of sophisticated and ever-changing fraud techniques.

Looking Ahead: Adapting to an Evolving Digital Landscape

The digital landscape is ever-changing, and so are the tactics of those who wish to exploit it for fraudulent purposes. At Brightwell, our commitment to safeguarding our clients’ interests is unwavering. We continuously evolve our strategies and technologies to counteract these threats, ensuring that our clients can conduct their financial transactions with confidence.

In this fast-paced digital era, the adaptation and innovation of our fraud prevention strategies are not just a response to emerging threats but a proactive step towards a more secure future. We invest in cutting-edge technologies and research to stay ahead of fraudsters. By harnessing the power of artificial intelligence, machine learning, and predictive analytics, we are able to anticipate and respond to potential threats more swiftly and effectively than ever before.

Our team of experts is constantly monitoring the digital horizon for new types of fraud, regulatory changes, and technological advancements. This vigilance allows us to be agile and responsive, adapting our strategies to meet the challenges of an increasingly complex digital ecosystem. We understand that fraud prevention is a dynamic field, and staying ahead requires a commitment to continuous learning and improvement.

As we continue to navigate the challenges of digital fraud, we remain dedicated to providing secure, innovative solutions. Our focus extends beyond the immediate protection of transactions; we are committed to building and maintaining trust with our clients. This trust is the cornerstone of our relationships, and it is nurtured by our relentless pursuit of security and integrity in all our operations.

Our journey in fraud prevention is not just about protecting transactions; it's about building trust and ensuring a secure financial future for all our clients.  As we move forward, our dedication to excellence in fraud prevention will remain a key driver in our mission to provide unparalleled financial services.  We are not just guarding transactions; we are securing the financial well-being and peace of mind of our clients, today and in the future.

References for ecommerce fraud  

Key Market Statistics
  • Merchant Losses in 2023: $38 billion
  • Merchant Losses in 2028: $91 billion
  • Total Merchant Losses 2023-2028: $362 billion