The European Central Bank (ECB) is going full steam ahead with its “Digital Euro,” and a preparation phase has already been launched. In this crucial phase, framework agreements are being sealed with technology providers to secure components for the CBDC (Central Bank Digital Currency). Among the important deals announced, one involves a Portugal-based start-up named Feedzai, whose job will be to prevent fraud involving the digital currency.
The 237.3 million euros (USD 278.69 million) contract with Feedzai will see the latter and its subcontractor, PwC, providing an AI model for scoring digital euro payments by their fraud risk, based on any deviation from a customer’s typical behaviour, interactions, and history. The move will help payment service providers decide whether to approve a transaction in digital euros, essentially an exchange between electronic wallets backed by the central bank.
Feedzai, the fintech start-up, reportedly processes USD 8 trillion worth of payments every year for clients, mostly global banks. Post the ECB contract, the venture has also received funding worth USD 75 million from Lince Capital, Iberis Capital, and Explorer Investments, among others.
Ex-rocket Scientists Protecting Customers’ Money
Feedzai is on a mission: to make the world a safer place for commerce, one transaction at a time. The start-up has already achieved milestones like notching up one billion global consumers, who trust Feedzai to protect their payments and the ability to process USD 8 trillion worth of payments every year.
Feedzai is now working with some of the world’s tier-one banking biggies. Its collaboration with the CoreCard Corporation (a global modern issuer processor) has helped the latter reduce declined transactions for fraud by 46%—boosting customer satisfaction.
The partnership has also detected 64% of all attempted fraud, keeping programmes and customers safe, and empowering clients to quickly create their rules and queues using advanced machine learning.
With European payment processor STET, Feedzai has joined forces to revolutionise fraud prevention, driving innovation through modernised tools, advanced AI, and enhanced infrastructure. In another tie-up with UAE-based Wio Bank, Feedzai again brought its A-game into play by deploying the start-up’s cutting-edge AI and machine learning capabilities to identify fraud.
As the Gulf region’s first platform bank, Wio is known for its innovation and a customer-first mindset. To protect its mission of empowering customers by delivering instant, seamless experiences, Wio turned to Feedzai’s “Digital Trust and Transaction Fraud for Banking Solutions,” and the move has so far proven to be a game-changer.
Feedzai has similar innovation- and result-driven partnerships with Novobanco, PayU, Standard Chartered, Raiffeisen Bank International, ANZ, and other tier-one banks—something which boosted the start-up’s chances of bagging the CBDC-related deal with the ECB.
The Key Solutions
Feedzai’s AI and machine learning-powered solutions will be discussed in three parts: Identity, Fraud, and AML. On the identity front, Feedzai helps its partner banks to verify customer legitimacy by deploying AI and “Behavioural Biometrics.” Feedzai uses out-of-the-box risk strategies that identify fraudster tactics based on industry patterns and confirmed fraud cases. These strategies include the detection of the usage of scripts, automation tools, or bots before hundreds of fake accounts are opened.
Feedzai uses comprehensive digital risk indicators, like known fraudulent devices, repeated devices, visual link analysis, and more, to uncover the likelihood of money mule accounts (bank accounts used by criminals to launder money by moving illegally obtained funds through them).
The identity-detection mechanism identifies stolen identities by analysing behavioural patterns, typing cadence, and keyboard shortcuts as the user submits the online application. The method distinguishes fraudsters from genuine customers to create a convenient and secure digital account opening experience.
Another worry banks deal with is Synthetic Identities (fabricated personas created by criminals by blending real and fake personal information). Feedzai addresses the concern by determining if numerous applications link back to the same device, IP address, network, etc. It prevents fraudsters from obtaining loans or credit cards and abusing promotional offers using fake identities.
Feedzai’s ability to automatically approve low-risk applicants, while freeing the banks’ fraud analysts from tedious manual reviews, has resulted in its partners witnessing a 74% increase in new account approvals, while fraudulent incidents have gone down by 65%. Banks are focusing on high-risk applications, ensuring more accurate decisions while reducing operational costs.
Another headache banks often face is account takeover fraud (cybercriminals gaining unauthorised access to an existing account). Feedzai’s “Behavioural Biometrics” comes in handy here. Account takeover, often known as ATO, gets prevented through the start-up’s “3-in-1 Approach,” under which hybrid AI models analyse how users type, click, and navigate to identify anomalies.
“Digital Trust” then detects malware, phishing-based manipulation attacks, and remote access Trojans to protect credentials and user sessions. Even after fool-proofing things, Feedzai continues its user device and network analysis method to ensure that every login, account change, and transaction comes from genuine human customers.
Preventing Fraud Across Channels
Feedzai’s AI-powered Transaction Fraud solution combines behavioural, non-monetary, and monetary data to prevent fraud others miss. This unique approach leverages AI, machine learning, and human expertise to protect the banks’ revenue, reputation, and customers.
By minimising incorrect fraud flags, the Transaction Fraud solution reduces customer frustration and lost revenue. It also streamlines the payment process with real-time risk assessment and decisioning. The AI model used here constantly learns and adapts to new fraud patterns, mirroring criminals’ tactics.
The solution also helps banks monitor merchants, secure transactions, and grow revenue. This becomes crucial as we all know that banks act as merchant acquirers by allowing businesses to accept credit and debit card payments.
Feedzai also assists banks in giving their merchants the tools to manage their fraud risk while strengthening the financial institutions’ partnerships and driving revenue. The start-up’s suite of Value-Added Services (VAS) leverages cutting-edge fraud monitoring technology to reduce losses and provide actionable insights.
Feedzai provides banks with automated KYC (Know Your Customer) and CDD (Customer Due Diligence) solutions. Technology is helping human professionals accurately distinguish fraudsters from genuine customers to create a convenient and secure digital account opening experience, while undertaking comprehensive screening and detection of suspicious activities, preventing illegitimate account access and transactions. Customer risk profiles automatically get updated using multiple risk vectors, including demographics, PEP and sanctions screening activity, and transaction history.
AML Transaction Monitoring helps banks reduce compliance costs with advanced automation, improving accuracy and accelerating decision-making. Financial institutions can adjust AML (anti-money laundering) scenarios and thresholds to align with risk tolerances, apart from leveraging Feedzai’s industry-leading AI and proven predictive models to solve long-standing inefficiencies.
Human professionals can customise workflows, investigate and manage cases, and report suspicious activity, all on one platform. Built-in workflows streamline repetitive tasks, such as quickly pivoting from alert view to SAR (Suspicious Activity Report) filing. Machine learning analytics prioritises alerts while optimising model performance.
Feedzai’s “Watchlist Screening” identifies customers flagged on global sanctions lists. The solution has evolved from binary logic to smart fuzzy matching, being data-agnostic while enabling multiple connections to relevant watchlists, with updates up to every 15 minutes.