MasterCard Using Artificial Intelligence to Attack False Declines

December 14, 2016

One of the biggest problems for merchants accepting credit cards is not fraudulent transactions, but rather false declines. Certainly, credit card fraud is costly, but it’s estimated that merchants lose $118 billion due to credit card declines where the transaction is genuine and the customer is not over their limit. It’s estimated that 15% of all transactions are falsely declined. It’s a problem that credit card companies like MasterCard are working on solving.

It’s easy to see just how bad the problem is. When a customer is declined, there is a good chance they won’t return. In fact, statistics show that 33% of customers who are declined falsely don’t return to the business ever again. This is due to several reasons, but likely embarrassment plays a role in this. Imagine having your transaction declined when you know you have enough money in your account or you are well below your credit limit.

False declines are a problem that the major credit card companies are aware of and are working on. MasterCard has recently begun using artificial intelligence (AI) to attack false positives. It’s an effort to ensure that customers are able to use their card when and where they want to.

Previously, MasterCard would use a very narrow band of parameters to decide if a transaction was valid or not. It was strongly biased to guard against fraud, but it didn’t take into account other data points. This is why they developed their Decision Intelligence engine and have deployed it globally.

The Decision Intelligence system looks at more than just the narrow band of variables and takes in a more complete picture of not only the customer but the retailers and even the card terminal itself. By looking at these richer data points, including customer behavior and even retailer behavior, the rate of false declines can be reduced.

MasterCard’s Decision Intelligence AI could be a winner for retailers. Instead of turning away up to 15% of their customers, they can convert these customers into repeat customers. That means more money in the pockets of retailers going forward.

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