Mastercard has developed a generative AI model that can help financial institutions improve their fraud detection rates by 20% on average

Payments giant Mastercard says it has built its own proprietary generative artificial intelligence model to help thousands of banks in its network detect and root out fraudulent transactions.

The company told CNBC exclusively that its new advanced AI model, Decision Intelligence Pro, will allow banks to better assess suspicious transactions on its network in real-time and determine whether they’re legitimate or not.

Mastercard’s proprietary algorithm is trained on data from the roughly 125 billion transactions that go through the company’s card network annually. The data helps the AI understand relationships between merchants — rather than words, as is the focus with large language models such as OpenAI’s GPT-4 and Google’s Gemini — and predict where fraudulent transactions are taking place, Mastercard said.

Heat-sensing fraud patterns

Instead of textual inputs, Mastercard’s algorithm uses the history of a cardholder’s merchant visit as the prompt to determine whether the business involved in a transaction is a place the customer would likely go.

The algorithm then generates pathways through Mastercard’s network — kind of a like heat-sensing radar — to find the answer in the form of a score.

A higher score would be one that follows the pattern of what’s the usual kind of behavior expected from the cardholder, and a lower score is out of that pattern.

This process all happens in just 50 milliseconds, according to Mastercard.

„The new transaction decisioning technology from Mastercard can help financial institutions improve their fraud detection rates by 20%, on average. In some cases, though, the model has led to improvements in fraud detection rates of as much as 300%.” said Ajay Bhalla, Mastercard’s president of cyber and intelligence business unit.

Mastercard says it’s invested more than $7 billion in cybersecurity and AI technologies over the last five years.