Stripe strikes back at rising e-commerce fraud with AI monitoring

Dive Brief:

Online payments network Stripe is launching a new artificial intelligence-based e-commerce monitoring suite called Radar, with the aim of helping Stripe's merchant customers block fraudulent transactions from occurring on its platform, TechCrunch reports.
Stripe tested Radar with a small group of customers that include crowdfunding nonprofit Watsi and custom T-shirt company Teespring. In one case, Watsi was able to block $40 million worth of attempted fraud, according to TechCrunch.
The machine learning aspect of the fraud prevention suite was enabled in part by assigning values to every transaction in Stripe's history, which helped create a predictive model that can be used in determining the likelihood that a given transaction is fraud.

Dive Insight:

Stripe last year raised about $100 million in funding from parties such as Visa and American Express with an eye toward helping smaller merchants enable digital payment capabilities through their web sites and mobile apps. TechCrunch estimates the startup has raised more than $300 million in total.

With that kind of money behind it, Stripe knows it must be aggressive in fighting e-commerce fraud, which could be incredibly damaging to the reputation of a new payments player — and a nightmare for its merchant customers.

With EMV chip card and terminal protections are already reportedly starting to reduce in-store payment fraud, the retail sector's attention is turning toward tackling the growing issue of e-commerce fraud. A study from Forter found that e-commerce fraud grew 27% just from the fourth quarter last year to the first quarter this year, and a separate Experian study reported 15% growth in e-commerce fraud incidents from 2015 to 2016.

Stripe is taking action in an innovative way and it's also offering the capability as an embedded aspect of its platform, meaning Stripe's merchants don't have to pay extra for it. That's probably a good decision on Stripe's part, considering a lot of its merchants are firms just beginning to enable payments for their own customers.

Getting this kind of intelligent detection and prevention capability as part of an existing platform should make it a big selling point for Stripe's platform, as many merchants won't want to waste the time and effort evaluating dedicated fraud prevention solutions.