Artificial Intelligence may turn out to be one of the most important technological developments in human history. That’s a big claim given the importance of electricity, the Internet, credit cards, computers, automobiles, and more. Yet AI is already proving disruptive in many industries, including finance, software development, and transportation. So, will AI be a force for good or bad? For better or worse, that’ll largely come down to how we use it. Unfortunately, some scammers are already harnessing the power of AI to perpetuate crime and fraud within the greater fraud ecosystem. This could result in data breaches, chargebacks, and various other headaches for merchants.
Understanding AI’s Potential For Good and Bad
Why is AI creating so much buzz? Among other factors, Artificial Intelligence can perform more complicated work that previously was reserved for human intelligence. Robots have long been replacing simple movements, such as screwing in a screw, but most robots have been rather dumb, able to carry out only very limited and simple tasks.
AI is different. It’s being used to create art, write poems, drive vehicles in chaotic environments, and more. It could be used to monitor financial transactions, make investments, and manage customer relations. It’s quite possible that you’ve interacted with an AI program if you contacted the customer service department of your bank or a merchant via a chat program in Facebook or on another platform. AI can handle many queries, providing information and helping you sort out issues.
Sadly, some fraudsters have realized they can harness AI to carry out criminal activities. Rather than writing a poem or liasing with customers, a criminal might direct AI to write and manage phishing email campaigns or generate fake IDs, like passports.
AI is an Efficient Fraudster
AI is still a relatively new technology, but already, criminals are figuring out how to use it to perpetuate crime. Fraudsters may already be using programs similar to customer chatbots to carry out phishing campaigns. Similar to human-driven phishing campaigns, AI bots can contact unsuspecting people, pretending to be the customer service department for a major online retailer. Or they might pretend to be from the Internal Revenue Service or another authority.
Running phishing campaigns used to take a lot of work on the part of the criminals. They’d have to write the phishing emails and messages, then handle all the communication with potential victims. This was labor-intensive and slow. Now, AI can be used to handle much if not most of the work. This is crucial for fraudsters because phishing campaigns have a very low conversion rate. Many people are now watching for fraud diligently and they know about some of the common tactics, like phishing. However, if AI is handling most of the work, a low conversion rate becomes less of a challenge for fraudsters.
Unfortunately, if someone falls prey to a phishing campaign and then hands over their payment information, including say a credit card number, it could ultimately be merchants who foot the bill. A fraudster could use stolen credit card info to buy something from your website (which could later result in a chargeback).
AI is even being used to emulate voices. For example, fraudsters might call someone up and pretend to be a loved one, such as a spouse. They could then ask for a credit card number to pay a utility bill or something else. The unsuspecting cardholder might end up passing over sensitive data, never even considering that it might not be their loved one. Unfortunately, this could result in fraudulent purchases, chargebacks, and other issues.
Later, after a merchant has already fulfilled the order, the legitimate cardholder may notice an unauthorized charge made with their credit card and then contact their bank for a chargeback. The merchant will likely end up losing the chargeback dispute and will have to foot the bill for the fraud.
AI Can Be Used to Fight Crime Too
AI isn’t all bad news. While emerging technologies often are double-edged swords, on the whole many technologies feared for their potential to damage society have turned out, in sum, to be a benefit for society. The same could prove true with AI. Fraudsters may use AI to perpetuate crime, but already leading cybersecurity companies, fraud mitigation services, payment networks, banks, and more are either using AI to fight crime or exploring ways to use AI to combat fraud.
Consider that criminals have been deploying AI to analyze software code and identify weak points and security gaps. At the same time, however, many cybersecurity firms are doing the same, sparking an arms race. The good news is, that many companies, governments, and other organizations on the side of the law have greater resources than the criminals.
Merchants have already been using a variety of anti-fraud and chargeback reduction tools to protect their bottom line and customers too. One way to spot fraud is to monitor for suspicious transactions, such as orders getting shipped to an odd shipping address. Doing this manually is time-consuming, but AI may be able to shoulder much of the burden of analysis. This could ultimately reduce chargebacks.
Ultimately, merchants must continue to be proactive in the battle against fraud and chargebacks. AI could help criminals in some ways, but AI and other tools, such as dispute management platforms like Chargeback Help, can help merchants and other businesses.