dark background feedzai how to choose a machine learning ... · businesses today are engaged in a...
TRANSCRIPT
How to Choose a Machine Learning Platform for Risk 043017
AGUIDEFORMERCHANTS,ACQUIRERS,ANDPAYMENTSERVICEPROVIDERS
HTC043017
Page2
A Guide for Merchants, Acquirers, and Payment Service Providers: How to Choose a Machine Learning Platform for Risk
AGUIDEFORMERCHANTS,ACQUIRERS,ANDPAYMENTSERVICEPROVIDERS
HowtoChooseaMachineLearningPlatformforRisk
TABLEOFCONTENTS
03TheImpactofPoorFraudDetection
04IsitTimetoSwitch?
05WhattoLookForinaMachineLearningPlatform
12ChoosingaMachineLearningPlatform:AChecklist
Page3
A Guide for Merchants, Acquirers, and Payment Service Providers: How to Choose a Machine Learning Platform for Risk
01:THEIMPACTOFPOORFRAUDDETECTION
Poorfrauddetectionhasthreebigeconomicimpactsonyourbusiness.
1
First,there’sthefinancialimpactofdenyingalegitimatecustomer.ABusinessInsider
reportfoundthatbusinessesarelosingmoreinfalsedeclinesthanthey’restoppingin
fraud.Foreverydollarabusinesspreventsinfraud,itlosesevenmore–$1.32–to
falsedeclines.1
2
Second,there’sthecostimpactthatchargebackshaveonyourbusiness.Beyondthe
costsyouincur,there'sthemanualtimeyouspenddisputingthem,thefeesyoupay
forthechargebackprocess,thelostgoods,thethreatofthewatchlist,andeventhe
shutdownofyouraccount.
3
Third,there’stheimpactonthespeedandefficiencyofyouroperations.Large
organizationsneedtoreviewandprocessordersasquicklyaspossible.Poorfraud
detectionplatformscreatebottlenecksthatdelayorderfulfillment,frustrate
customers,andthwartyoureffortsduringpromotionsandpeakperiods.
1 http://www.businessinsider.com/the-false-declines-report-the-86-billion-problem-undermining-e-commerce-merchants-fraud-prevention-strategies-2016-7
Page4
A Guide for Merchants, Acquirers, and Payment Service Providers: How to Choose a Machine Learning Platform for Risk
02:ISITTIMETOSWITCH?Agrowingbusinessneedsafrauddetectionplatformthatcankeepup.Areyoublockingtoomanylegitimatetransactions?Isyourchargebackratetoohigh?Areyoumissingtoomanyshipments?
Businessestodayareengagedinawaragainst
savvyandcreativefraudsters.Atthesametime,
theyaretryingtokeeppacewithrisingcustomer
expectationsoffastandfrictionlessexperiences.
Businessesarealsocompetingwithother
businessesinanarmsracetoacquirethebest
machinelearningplatformforfrauddetection.
ThedawnofattainableAIhasintroducedusto
newsystemsthatarenowcapableofdetecting
fraudautomatically,bysurfacingpatternsand
insightsthatwereinvisiblebefore.Butall
machinelearningplatformsarenotcreatedequal.
Choosingtherightplatformcanmakeahuge
differencewhenitcomestoprovidinggreat
customerexperiences,drivinggreatoperations,
andwinningthewaronfraud.
Whatdoestherightplatformlooklike?
Thisguidewillhelpyouchoosebyillustratingthe
capabilitiesyouneedwhenconsideringaplatform
that’sfast,thatscales,andthatexplainsits
thinking.We’vealsoprovidedachecklistatthe
endtosummarizethisreport.
Page5
A Guide for Merchants, Acquirers, and Payment Service Providers: How to Choose a Machine Learning Platform for Risk
03:WHATTOLOOKFORINAMACHINELEARNINGPLATFORMAGILEMODELS
Cantheplatformsupportmultiplemodels?Howaboutcustommodels?Cantheplatformkeeppacewithfraudasitevolves,andbeproactiveratherthanreactive?
Multiplemodelsareimportantbecause
fraudstersbehavedifferentlydependingon
wheretheyare,andwhatthey’redoing.
Platformsthatcanonlyrunonemodelwillusea
generalizedviewtolookforspecializedbehaviors,
whichresultsinlowerfrauddetectionratesand
higherfalsepositives.
Aplatformwithmultiplemodelsmustalsobe
abletoscoreordersatscale,bytakingallthe
differentinputstreamsfromthesemultiple
modelsandtranslatingthemintoonesingle
storylineorriskprofilethatahumanreviewercan
understand.
Beyondmultiplemodels,cantheplatformsupport
custommodels?
Intherushtobuyamachinelearningplatform,a
businessrunstheriskofpurchasinganoff-the-
shelfsolution.Buteverybusinessisdifferent,and
everymodelshouldbedifferenttoo.Certain
businesseswillwantcustommodelsthatarebuilt
bydatascientistswithdomainexpertiseinspecific
industries.Custommodelsmakeformorepower
andmoreinsight,becausetheytakeintoaccount
theuniquefraudpatternsthateachindustryfaces.
Page6
A Guide for Merchants, Acquirers, and Payment Service Providers: How to Choose a Machine Learning Platform for Risk
EXPLAINABLELOGIC
Doestheplatformcontainahuman-readablesemanticlayerthatexplainsitsunderlyinglogic?Machinelearningsystemsthatuseneuralnetworkalgorithms,forinstance,maybeeffectiveinpatterndetection,buttheirlogicishardtodecipher.
Somemachinelearningsystemsmaketheir
decisionsinsideablackbox,whichcreatestwo
seriousproblems.
First,there’sacontrolproblem,becausehumans
can’tmanageandimproveasystemtheydon’t
understand.Second,there’saregulation
problem,becauseabusinesscan’tdocumentor
validatethedecisionsthathappeninsideablack
box.
Comparethattoaplatformthatdoeswhitebox
processingtoprovideclear,human-understandable
reasonsforitsdecisions.Certainmachinelearning
platformspredictpatternsusinganalgorithm
calledRandomForest,whichismadeoftensof
thousandsofdecisiontrees.Awhiteboxsystemcan
takethefewtop-mostfactorsfromthisensemble
ofdecisiontrees,thenweighandcommunicate
themtothehumaninasimpleway.
ALGORITHM PRO CON
RandomForest(akaEnsembleofDecisionTrees)
•Generalizespatternswell•Robusttodifferentinputtypes(texts,numbersofscales,etc.)•Robusttomissingdata•Robusttooutliersanderrors•Fasttotrainandscore•Triviallyparallel•Requireslesstuning•Probabilisticoutput•Canadjustthresholdtotradeoffbetweenprecisionandrecall•Verygoodpredictivepower•FoundtowinmanyMLcompetitions
•Canbecomecomplextointerpretasnumberofdecisionsgrow(inherentnatureofincreasedcapacitytomakedecisions)•Requireslabeleddata
NeuralNetwork
•Abletorepresentcomplexpatterns•Goodpredictivepower
•Cannothandledifferentinputtypes•Needsscalinginputs•Can’thandlemissingvalues•Notscalable•Slow•Requirestuning•Lackofinterpretability•Requireslabeleddata
Page7
A Guide for Merchants, Acquirers, and Payment Service Providers: How to Choose a Machine Learning Platform for Risk
Theanatomyofawhitebox
CLEARANSWERSWhatdoweknowaboutthisorder?
REASONSTOALLOW
Description Risk RiskFactor
IPaddressisonlybeingusedbythiscustomer 0.50% 0.9x
IPcountrymatchesshippingcountry 0.50% 0.9x
IPcountrymatchescustomer’shomeandshippingcountries 0.40% 0.7x
IPcountrymatchescustomer’shome,shipping,andbullingcountries 0.30% 0.5x
REASONSTOBLOCK
Description Risk RiskFactor
Customerseenindistantlocationsinashortperiodoftime 60.00% 100.00x
Customerisbehindproxy 6.00% 10.0x
CustomerhasusedtwodifferentIPaddresses 0.90% 1.5x
Customerisusingafreeordisposableemailaddress 0.70% 1.1x
Forexample,awhiteboxexplanationmightsaythattheuserhasbeendeclinedbecausetherewerefour
recenttransactionsindistantlocations.Theideahereistoputhumansincontrolbyarmingthemwiththe
informationtheyneedtoreviewordersmoreintelligently,andtocommunicateclearlyaboutwhycertain
orderswereapprovedordeclined.
Page8
A Guide for Merchants, Acquirers, and Payment Service Providers: How to Choose a Machine Learning Platform for Risk
360°VISION
Dataisthefuelforamachinelearningengine.Tobeeffective,aplatformneedstobeabletotakeinalldatafromallsources,soitcaningesteverykindofsignalthatthecustomerisproviding,nomatterthechannelortheusecase.
Manysources,onestory
Manyplatformscanonlytakeindatafromcertain
sourcesorchannels.Forinstance,aplatform
mightlookatpoint-of-saledatabutnotmobile
devices.
Thesesinglechannel,singleusecaseplatforms
canbebreached.Ittakesaplatformwith
omnidataandomnichannelcapabilitiestokeep
pacewithtoday’sfraudsters.
Togetacompleteviewofeverytransaction,a
businessneedsaplatformthatcaninstantlyingest
everykindofdata,whetherit’scomingfroman
internalsystem,likeyourCRMsystem,orexternal
datasources,likeenrichers.
Page9
A Guide for Merchants, Acquirers, and Payment Service Providers: How to Choose a Machine Learning Platform for Risk
HYPERGRANULARPROFILES
Aplatformreachesitsdecisionstocreateprofilesofnormalbehavior,andflaginstancesofabnormalbehavior.Butsomemachinelearningplatformscanzoomintoahigherlevelofresolutionthanothers.
COHORTSCOMEBYTHEDOZEN
SEGMENTSOFONECOMEBYTHEHUNDREDSOFMILLION
CustomerSegments(BabyBoomer,Millennial)AccountType(Gold,Platinum)
MerchantCategory(DigitalGoods,Fashion)DeviceClass(iPhone,iPad)
EachCustomer(Susan)EachAccountNumber(134149553)
EachMerchantID(XX4956Y)EachDeviceID(WERB5909O2BYT)
Doestheplatformcreateprofilesofcohorts?Or
doesitusesegment-of-oneprofilestolookat
individualentities?Segment-of-oneprofiles
don’tlookat“womenbetweentheagesof30
and35.”Theylookat“Susan.”Andtheydon’t
lookat“devicesinthiszipcode.”Theylookat
“Susan’sdevice.”
Bycreatingprofilesofmanydifferententities(the
merchant,thedayoftheweek,thecreditcard),
machinelearningplatformscanreachnewlevelsof
sensitivity,anddetectfraudwithgreaterpowerand
accuracy.
Page10
A Guide for Merchants, Acquirers, and Payment Service Providers: How to Choose a Machine Learning Platform for Risk
GLOBALCASEMANAGEMENT
Big,complexbusinessesneedascalablecasemanagementtool,onethatmakesdistributedteamseffectiveatmanagingmanualreviewqueuesthatareglobalandround-the-clock.
Organizationscanhavemanyhundredsofpeople
loggingintothesamesystem.Acase
managementtoolneedstohaveself-configurable
workflowssothateveryoneinthisdiverse
userbasecanseetherightactionableinsightsat
therighttime.
Doyouhaveacasemanagementtoolthat
automaticallydistributesworkbasedondifferent
criteria,andprioritizesthemostimportantorders
toreview?
Canteamsacrossfraud,shipping,andcustomer
serviceallgetexactlywhattheyneedoutofthe
samesystem?
Therightcasemanagementtoolalsoneedstomake
surethatmanualreviewqueuesareprioritizedand
sortedinawaythatallowsforbusinesscontinuity.
Otherwisetherewillbegapsinyourqueue
managementthatafraudstercancircumvent.
Page11
A Guide for Merchants, Acquirers, and Payment Service Providers: How to Choose a Machine Learning Platform for Risk
SELF-CONFIGURABLEPLATFORM
Inaworldofgas-poweredcars,machinelearningsystemsarethenewelectriccars.Andaplatformthat’sself-configurablegoesonestepfurther.Itmeansyou’renotjustbuyingthecar.You’rebuyingthecarfactory.
Aplatformwithself-configurabledashboardslets
youcustomizethespecificmetricsthatyouwantto
see,soyoucanhaveownershipoveryourcontrol
andcommandcenter,andflexibilitytochoose
businessKPIsthatarerelevanttomanagingfraud.
Maybeyouwanttomeasurechargebackratesby
department,orcountry,orpartner.
Maybeyouwanttoseechargebackratesbasedon
teammembers,orbusinessunit,orproductline.
Typically,ifyouwanttochangeyourdashboard
reporting,youneedtogobacktothevendor.But
withself-configurabledashboardsandreporting,
thecontrolisyours.
AUTOMATICFEEDBACKLOOP
Abigbusinessneedstofindeveryopportunitytoautomate.Amachinelearningplatformshouldbeabletoautomateitsingestionofchargebackdatabyintegratingwiththeacquiringbank’sdata.Otherwiseemployeeswillneedtopulluporders,onebyone,tologchargebacksmanually.
Aplatformshouldalsointegratewithmanual
reviewdecisions.Whenafraudmanagerdoes
researchandmarksasuspicioustransactionas
fraud,therightplatformgetsmovingandfindsthe
patternsassociatedwiththefraud.Theanalysthas
madethemachinesmarter.
Automationletsaplatformthinkindependently,
whichmeansaplatformthatcanfollowthethread
oflogiconitsowntodetectwell-coordinated
criminalbehaviorinrealtime.Forexample,a
platformwithautomationwillfindthepatterns
associatedwithfraudspikes,sothatwhenafraud
ringmovestoadifferentcity,theplatformwill
detecttheirbehaviorimmediately.
Page12
A Guide for Merchants, Acquirers, and Payment Service Providers: How to Choose a Machine Learning Platform for Risk
04:CHOOSINGAMACHINELEARNINGPLATFORM:CHECKLIST
☐ AGILEMODELSCantheplatformhavemultiplemodelstosupportyourbusinessatscale?Canitsupportcustommodelsthatarebasedondomainexpertiseofthefraudpatternsspecifictoyourindustry?
☐ EXPLAINABLELOGICDoestheplatformhavewhiteboxAIthatexplainsitsreasoning,putsthehumanincontrol,andleavesapapertrailforregulators?
☐ 360°VISIONWilltheplatformtakeacompleteviewbyingestingeverykindofdatainyourecosystem,protectingthecustomersfromthebeginningoftheirtransactionjourneytotheend?
☐ HYPERGRANULARPROFILESDoestheplatformdetectanomaliesbycreatingnormalbehaviorprofilesforsegmentsofmany?Ordoesitzoomin,andlookatsegment-of-oneprofiles?
☐ GLOBALCASEMANAGEMENTHowmuchscaleandcomplexitycanthecasemanagementtoolhandle?Doyouhaveawaytoautomaticallyprioritizeanddistributemanualreviewwork?
☐ SELF-CONFIGURABLEPLATFORMDoyouhavetheownershipandflexibilitytoself-manageyourdashboardsandreporting,soyoucanseetherightmetricsandKPIsrelevanttofightingfraudatyourorganization?
☐AUTOMATICFEEDBACKLOOPDoesyourplatformintegratewithchargebackdataandmanualreviewdatasothatitcanlearnandimproveonitsown,automatically?
Page13
A Guide for Merchants, Acquirers, and Payment Service Providers: How to Choose a Machine Learning Platform for Risk
ABOUTFEEDZAIFeedzaiisAI.We’recodingthefutureofcommercewithtoday’smostadvancedriskmanagementplatformpoweredbybigdataandartificialintelligence.Ourmissionistomakecommercesafe.Theworld’slargestbanks,paymentprovidersandretailersuseFeedzai’smachinelearningtechnologytomanagerisksassociatedwithbankingandshopping,whetherdigitallyorinperson.
www.feedzai.com