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Interviews

The value of pre-authorization screening in the payments ecosystem of today

Monday 19 August 2019 | 08:55 AM CET

Spencer McLain, Ekata: The key to successful pre-authorization screening is in the timing and the intelligent use of data

What is the story behind Ekata? What is the company’s purpose on the market and what challenges does it seek to address?

Ekata (formerly branded as Whitepages Pro) provides global identity verification via APIs and a SaaS solution. Our product suite is powered by the Ekata Identity Engine (EIE), which uses complex machine learning algorithms across the five core consumer attributes of email, phone, name, physical address, and IP, to derive unique links and features from billions of real-time transactions within our proprietary network and the data we license from a broad spectrum of global providers.

We help cross-border digital commerce companies grow their revenue by maximizing predictability of good transactions. From our Transaction Risk API delivered in under 100ms for pre-authorization models to our robust manual review tool, Pro Insight, our identity verification product suite verifies over 1.8 billion requests per year in 238 countries for 1700+ companies.

Could you please explain how the pre-authorization screening works? What makes it an innovative solution?

Ekata’s definition of pre-authorization is the time period after payment details have been submitted, and before sending to the issuer for authorization request. This means only good transactions are sent to the issuer. To pre-authorize transactions means to be proactive rather than reactive. It is innovative because it works as a dynamic layer to help prevent fraud and improve customer experience.

The key to successful pre-authorization screening is in the timing and the intelligent use of data. Applying pre-authorization screening helps to counterbalance the challenges that the evolved ecosystem and regulatory environment have created. Using pre-authorization builds bridges across security, privacy, and customer experience.

In which way is this solution relevant in the PSD2 context?

Ekata helps payment service providers (PSPs) and merchants to meet the challenges associated with PSD2’s introduction of Strong Customer Authentication (SCA). Specifically, the global identity verification data that Ekata provides can be leveraged for the Transaction Risk Analysis (TRA) exemption to SCA. TRA will require sophisticated risk models, powered by machine learning algorithms and layering of predictive data (e.g. Ekata), to be put in place. And for PSPs, they’ll need to have a low-enough network fraud rate before they can offer TRA exemptions to their merchant customers. This is why Ekata’s solution is valuable for allowing merchants and PSPs to forgo SCA, reduce checkout friction, an ultimately increase payment conversions.

What is required to build a layered approach to pre-authorization screening?

Historically, businesses relied solely on internal data and signals such as blacklists, shopping cart data, customer history, etc. during the pre-authorization portion of the workflow. This was largely due to the lack of availability of third-party data sources. In addition, third-party sources were not involved in the pre-authorization screening flows, as most were not API-based, and were thus too latent to meet the need for a fast and economical model. The result was an inability to meet the volume and latency demands within an environment of increasing transactions and compressed time window expectations.

Nonetheless, Artificial Intelligence (AI) techniques like Machine Learning (ML) have facilitated innovation to provide the accuracy, speed, and scalability needed to achieve this balance. That being said, any successful ML model requires clean, accurate data to power it, and the more data a model can ingest, the better the performance. Third-party data sources are now an integral part of the pre-authorization workflow.

However, pre-authorization cannot rely on a single external data source. Instead, a layered approach is needed for detection and authentication early in the transaction flow.

Are there any commerce verticals where pre-authorization screening is crucial?

Verticals, such as travel, digital goods, and on-demand delivery, absolutely require a form of pre-authorization screening. Consumers do not want to wait for their payment authorization to be assessed for fraud (through slow and high-friction authentication methods like manual review) before they can receive the eBook or food they ordered. To win and maintain customers while keeping fraud low in these highly competitive verticals, online businesses need to implement pre-authorization risk decisioning processes.

Where can interested audiences learn more about this topic and Ekata’s solutions?

Please download our eBook for more information at https://ekata.com/cnp-aug-pre-authorization-screening-in-payments-ecosystem/?utm_campaign=cnp-aug-linking-digital-identity-back-to-humanity

About Spencer McLain

Spencer McLain is Ekata’s Vice President of the EMEA region. He leads Ekata’s international expansion efforts and owns key relationships with card brands and payment service providers. Spencer supports multiple fraud platform partnerships, collaborates with Product Management to improve Ekata’s API products to ensure that they provide maximum lift in risk models and/or rule-sets, and acts as a key liaison to complex data customers who require specialized testing/analysis.

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