Could Artificial Intelligence Prevent Fraud?

Fraud takes place in nearly every corner of the business sector. Whether you manage a bank, run a Fortune 500 company, own a small grocery store, or get paid through PayPal to provide products and services online, you can experience fraud— and hemorrhage money as a result.

Duleep Pillai of Veltec Networks estimates that “every $100 of fraud costs businesses $240” on average.

So, how can we stop it?

Increasingly, fraud is committed beneath the cloak of the Internet. Fraudsters and would-be criminals work from all corners of the earth to target the unsuspecting and innocent.

Because of this specific line of attack, unfortunately, police officers and even international crime units can do little to ameliorate the problem. Instead, it’s up to cybersecurity specialists to detect, target, and protect against these criminals.

In order to do this, cybersecurity specialists are increasingly turning to artificial intelligence as their main line of defense.

What Is Artificial Intelligence?

Artificial intelligence or A.I. refers to a specific type of machine learning. When humans can program computers and computer software to perform specific actions or tasks and, in the process, the machines can learn from these experiences in order to adjust and improve over time, this is artificial intelligence.

How Can A.I. Help Prevent Pervasive Fraud?

A.I. helps prevent fraud because it replaces human judgment as the main form of fraud detection.

Several decades ago, fraud was usually in the form of small grifts from individual criminals. The targets were also individuals, or occasionally, insurance fraud or corporate fraud would handicap a business or organization significantly.

On the personal and business levels, detecting this type of fraud fell under the responsibility umbrella of individuals. In other words, at a business, an individual human would have the job of monitoring ingoing and outgoing funds and internal business behaviors. If they saw anything unusual, they would red-flag it, and the issue would be investigated for potential fraud. It was time-consuming work, but it was the only way to nab scammers who were trying to operate beneath the radar.

As we know, in recent decades, fraud has moved from low-level grifts to huge, costly scams. Several significant changes have resulted in this shift:

  • Fraud is now done almost exclusively over the Internet.
  • Fraud is committed remotely (by a criminal in Eastern Europe, for example).
  • Fraud now touches every industry: Credit card lenders, accounting firms, elder care institutions, banks, and essentially every other type of industry are experiencing these crimes.
  • Many types of fraud are automated, so they’re constantly hacking away at security systems.
  • Fraud criminals are always coming up with new sweeping phishing schemes and sending out malware in droves, like huge fishing nets to see what they can catch.

In other words, human beings tasked with monitoring for fraud simply can’t keep up.

And when humans can’t keep up, they turn to machines. Enter: Artificial Intelligence.

The Role of Artificial Intelligence: Pattern Recognition

Artificial intelligence in the world of fraud means recognizing patterns. Humans teach A.I. fraud detection programs to memorize normal, safe patterns of behavior within a business or internal system. Then, they teach these programs to alert humans when something abnormal occurs.

This can be done on a large scale with an entire network of computers or on a smaller scale with one PC. For example, Laith Pahlawan of Orange Crew notes that A.I. security programs can, “look for commands that your PC runs that are out of the common usage for a particular PC or a service that installs itself. These [A.I.] program will stop the process and alert the user of a possible hack or intrusion.”

In a business, Duleep Pillai says that, “A.I. validates transactions by evaluating customer behavior patterns and other data points. A.I.’s ability to react in real-time and learn patterns quickly to recognize fraudulent behavior is what has made is such a popular defense tool.”

In some cases, A.I. and human intelligence work together. This is typically called supervised machine learning, and it can be even more effective than A.I. alone when detecting fraud attacks.

Many people are concerned about A.I. replacing human intelligence. While this may certainly be a legitimate concern in some areas — it has the potential to deplete entire job sectors, alter artistic outcomes, etc. — in the world of cybersecurity, artificial intelligence may very well be what saves us from the onslaught of pervasive fraud.

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.