Tender-Switching Fraud Scoring for Payment Authorization
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Solution Overview
Problem
Existing transaction fraud systems monitor card-level buying behavior, leading to missed fraudulent activities and unnecessary transaction declines, which negatively impact consumer experience and merchant/financial institution revenue.
Innovation Solution
A system and method that authorize transactions based on a user's tender-switching practices, determining a user-specific fraud threshold score by analyzing instances of switching between multiple payment vehicles, balancing fraud risk with transaction completion.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If transaction fraud systems monitor card-level buying behavior, then fraud detection capability is improved, but false declines increase and consumer experience deteriorates
Solution Approach 1:
The patent combines multiple card-level transaction histories into a unified user-level view by linking cards through user identifiers. The system merges transaction data across different payment vehicles to create a comprehensive spending pattern profile, enabling fraud detection that considers the user's overall behavior rather than isolating individual card transactions.
Solution Approach 2:
The system dynamically adjusts fraud threshold scores based on real-time analysis of tender-switching patterns. When a user exhibits normal switching behavior between cards, the system maintains higher authorization thresholds. When suspicious patterns emerge (e.g., rapid switching after fraud detection), the system dynamically lowers thresholds to prevent further fraudulent attempts while allowing legitimate transactions to proceed.
2Reliability
If suspicious transactions are declined without confirmation of fraud, then fraud prevention is improved, but transaction completion rate decreases and revenue is lost
Solution Approach 1:
The system implements continuous feedback loops where transaction outcomes (authorized, declined, or challenged) feed back into the user's fraud threshold score. When transactions are successfully authorized after tender-switching, the system learns from this positive outcome and adjusts future threshold settings. This feedback mechanism allows the system to maintain high fraud prevention while reducing false declines of legitimate transactions.
Solution Approach 2:
The system changes the fraud threshold parameter dynamically based on user behavior patterns rather than using fixed thresholds. The fraud threshold score is adjusted as a continuous parameter that reflects the user's current risk profile, allowing flexible adaptation to changing transaction patterns while maintaining appropriate security levels.
3Device complexity
If card-level monitoring is used for fraud detection, then system complexity is reduced, but measurement precision of spending patterns decreases
Solution Approach 1:
The patent adds a new dimension to fraud detection by introducing the user-level aggregation layer above card-level monitoring. Instead of analyzing transactions in a single card dimension, the system creates a multi-dimensional view that encompasses all cards associated with a user, enabling more precise spending pattern analysis while managing complexity through hierarchical organization.
Data Source
AI summary
Systems and methods are disclosed for establishing fraud detection system for authorizing payment for consumer transactions based on a user's tender-switching or transaction abandonment practices. One method includes: receiving transaction history of a user, the transaction history including a first payment vehicle and a second payment vehicle; determining, of the received transaction history, one or more instances of switching from one the first payment vehicle to the second payment vehicle; and determining a user-specific fraud threshold score for the user, based on the determined instances of switching from the first payment vehicle to the second payment vehicle.