Recent analyst reports have compared a spectrum of rules-based and hybrid AI vendors in the fraud prevention market. From Forter’s perspective, these reports represent a snapshot in time instead of the directional shift away from rules and towards hybrid AI.
Rules-based vendors commonly utilize scoring engines that rely on users to create workflows that operationalize transaction scores. Meanwhile, hybrid AI combines advanced machine learning and human intelligence to dynamically stay ahead of sophisticated fraud attacks with instant, accurate decisions.
Here’s why industry leaders are moving away from rules and switching to hybrid AI solutions:
Rules focus on hard data
Modern fraudsters know how to evade rules by manipulating hard data elements (such as IP address, email address, shipping address, etc.). Therefore, merchants employing a rules-based approach typically experience one of two outcomes:
- Too few rules = higher levels of fraud and chargebacks
- Too many rules = higher false decline (or insult) rate of good customers
Meanwhile, hybrid AI enables merchants to link all available data elements to collectively understand who is behind each transaction, and how that identity is connected to others across a network of merchants.
Rules require constant maintenance
Rules are static workflows that quickly become dated and are constantly tested and exposed by fraudsters. For example, during the 2022 holiday season, fraudsters figured out how to bypass some rule-based fraud vendors with low-tech address manipulation. Rules-based vendors were unable to respond quickly, and merchants were left to make revisions and battle growing review queues.
By understanding the connections across identities, hybrid AI ensures that fraud rings are readily identifiable — which is especially important as they test new tactics to circumvent existing fraud defenses.
Fraudsters are now using AI/ML
The pace of innovation for merchants and fraudsters is accelerating. Fraudsters are now using AI to execute increasingly sophisticated scams faster. The introduction of ChatGPT exemplifies that. Forter’s own fraud expert (in a test) was recently able to coax ChatGPT into providing credit card information.
Fighting AI-armed fraudsters with legacy rules is a losing battle. That’s why leaders are moving to vendors that are innovating ahead of fraudsters — they’re asking what portion of revenue is invested in R&D and pushing for clear product roadmaps.
“Forter’s leadership position on the Frost Radar indicates that its approach to innovation and growth is succeeding.” – Frost & Sullivan
One of the reasons that rules are still in favor is that they purport to offer users ‘control’ over fraud prevention. But the reality is that ‘control’ is just the burden of creating and maintaining rules and managing queues. We believe that real control comes in the ability to surface new insight, troubleshoot with immediacy and report on business-level impact.
“Forter sports strong built-in models for payment channels and transaction types as well as ahead-of-the-pack ROI reporting” – The Forrester Wave™: Digital Fraud Management, Q3 2023
Forter is a market leader in using hybrid AI and serves the world’s leading brands. That’s why four of the 10 largest digital commerce merchants in the U.S., five of the largest footwear companies, three of the largest cosmetic companies, three of the largest hotel chains, and four of the largest apparel companies in the world all trust Forter.
“When people talk about machine learning and AI, it’s the most abused and overused term … what really differentiated (Forter) was they were really AI. The other guys … weren’t really AI, it was a decision tree with some statistics. It wasn’t nearly as robust of a solution …” – PacSun (Customer)
Merchants looking to future-proof their operations must readily adopt a hybrid AI-powered platform to enable digital commerce. The shift away from rules to hybrid AI is inevitable — leaders are moving now to improve customer experience and their bottom line.