Mastercard and Feedzai: Tackling Alarming Crypto Fraud with AI Partnership — 4 Key Talking Points

Mastercard’s increased focus on detecting and preventing fraud within cryptocurrency exchanges is underscored by its exclusive partnership with Feedzai, a regulatory technology platform specialising in leveraging artificial intelligence to combat money laundering and online financial scams. This collaboration reflects Mastercard’s commitment to enhancing security measures in the rapidly evolving landscape of cryptocurrency transactions.

By teaming up with Feedzai, Mastercard aims to deploy advanced AI-based tools to identify and thwart fraudulent activities associated with cryptocurrency exchanges. The use of artificial intelligence in this context is crucial for staying ahead of sophisticated techniques employed by bad actors in the digital financial realm.

The exclusive nature of the partnership suggests a strategic and dedicated effort by Mastercard to bolster its capabilities in addressing the specific challenges and risks posed by fraudulent activities within the cryptocurrency space. This move aligns with the broader industry trend of financial institutions recognising the need to adapt and innovate their security measures as digital currencies become more prevalent in the financial ecosystem.

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4 Key Talking Points

1. Feedzai’s Partnership with Mastercard

Feedzai, through its partnership with Mastercard, will directly integrate with the CipherTrace Armada platform to enhance fraud detection and monitor transactions from over 6,000 cryptocurrency exchanges. This collaboration aims to provide real-time alerts about suspicious crypto transactions, including those related to fraud, money laundering, and other illicit activities.

Rather than accessing CipherTrace Armada through an API, Feedzai will embed it directly into its technology, allowing for seamless data integration. The integration is expected to increase fraud detection capabilities, protecting consumers and identifying potential money laundering activities and mule accounts exploited by fraudsters.

According to Feedzai data, approximately 40% of scam transactions involve direct transfers from bank accounts to cryptocurrency exchanges. The partnership also grants Mastercard access to Feedzai’s artificial intelligence capabilities, which can swiftly identify and block suspicious transactions while recognising legitimate ones.

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2. The Move to Legitimise Cryptocurrencies as Mainstream Financial Assets

Feedzai is proud to partner with financial services giant @Mastercard to protect consumers worldwide from the threat of cryptocurrency fraud.

Under the partnership, Feedzai will integrate Mastercard’s crypto intelligence solution, @ciphertrace Armada, into our RiskOps platform,… pic.twitter.com/T711JkxMJw

— Feedzai (@feedzai) November 20, 2023

Feedzai’s RiskOps platform, analysing transactions exceeding $1.7 trillion annually, boasts advanced AI technology. The partnership seeks to address the challenge of banks inadvertently blocking transactions involving legitimate entities within the crypto space while omitting potentially fraudulent ones.

Mastercard’s move to partner with Feedzai and integrate with the CipherTrace Armada platform reflects a strategic push by the company to legitimise cryptocurrencies as mainstream financial assets. This move signals a commitment to subjecting crypto transactions to the same rules and compliance frameworks as traditional financial assets.

Large financial institutions, including banks, have increasingly shown interest in exploring cryptocurrencies within their products and services. However, the hesitation to integrate commercially available crypto products into their core offerings has been influenced by concerns about the lack of comprehensive regulations and the prevalence of fraud and scams in the crypto space.

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3. How They Plan to Enhance Fraud Detection and Monitoring Capabilities

The partnership between Mastercard and Feedzai is a step toward addressing these concerns by enhancing fraud detection and monitoring capabilities for crypto transactions. It is part of a broader industry trend where financial institutions are seeking ways to navigate the regulatory landscape and mitigate risks associated with digital assets.

The rise in crypto-related losses due to theft and scams underscores the challenges faced by the industry. In response, efforts like those by Mastercard aim to create a more secure and regulated environment for crypto transactions, fostering greater trust and acceptance within the mainstream financial ecosystem.

Mastercard, with its extensive global network, serves as a critical infrastructure for banking institutions worldwide to process and monetise payments. It competes with Visa, another major player in the payments industry, providing support for card payments and various fintech services.

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4. Banks Remain Cautious in the UK to Associate Themselves with Cryptocurrencies

In the United Kingdom, however, banks have exhibited reluctance in associating themselves with cryptocurrencies. Several prominent lenders in the U.K., including JPMorgan, NatWest, and HSBC, have taken measures to restrict or block transactions involving cryptocurrencies on their networks. Their primary concerns are often related to the perceived risks of fraud associated with crypto transactions.

This cautious approach by traditional banks in the U.K. regarding crypto transactions has sparked criticism, especially from figures like Coinbase CEO Brian Armstrong. Armstrong argued that such restrictions contradict the U.K.’s ambition to position itself as a global hub for “Web3,” the next evolution of the internet that emphasises decentralisation and blockchain technology. The tensions highlight the ongoing challenge of reconciling traditional financial institutions with the emerging landscape of digital assets and blockchain technologies.

Ajay Bhalla, President of Cyber and Intelligence Solutions for Mastercard, emphasized the heightened risk associated with cryptocurrency transactions due to the interconnectedness of modern life and the increasing digital penetration of finance. According to Bhalla, Mastercard’s latest data indicates that fraud on transactions involving the purchase of cryptocurrencies is five times higher than on regular fiat transactions.

What Does the Future Hold with the Partnership of Mastercard and Feedzai?

In response to these challenges, Mastercard has forged a partnership with Feedzai to enhance the capabilities of financial institutions in distinguishing between legitimate and fraudulent transactions. This collaboration follows Mastercard’s acquisition of CipherTrace, a U.S. blockchain sleuthing firm, in 2021. The integration of CipherTrace’s technology into Mastercard’s offerings, including the CryptoSecure product launched in 2022, aims to analyse and block transactions originating from crypto exchanges with a higher susceptibility to fraud.

The partnership with Feedzai is positioned to further strengthen Mastercard’s commitment to addressing fraud and enhancing security measures in the evolving landscape of digital assets and cryptocurrency transactions.