AI-powered fraud prevention: Enhancing security and customer experiences

Companies can harness the power of artificial intelligence (AI) to counter fraudulent activities, enhancing both customer experiences and financial security. An important aspect of this strategy involves establishing a reliable and seamless identity verification process for customers across various communication channels. By doing so, businesses can facilitate smoother interactions for legitimate customers while simultaneously identifying and thwarting attempts by malicious entities to exploit vulnerabilities in the system.

One emerging threat is the manipulation of SMS traffic, commonly known as artificially inflated traffic. This form of fraud takes advantage of mobile number input fields on digital platforms to generate and divert SMS messages containing sensitive information such as one-time passwords (OTPs).

Fraudsters manipulate these systems to divert SMS messages to numbers they control, subsequently profiting from the revenue generated through these fraudulent SMS activities. This practice not only incurs additional messaging costs for targeted businesses but also jeopardizes the security of customer communications.

Detecting and blocking AIT

To address this challenge, advanced AI-driven solutions have been developed to enhance the conversion rates of SMS OTPs and reduce overall costs per user. These solutions operate by precisely detecting and blocking instances of artificially inflated SMS traffic. By integrating such tools into their systems, companies can identify and prevent fraudulent SMS activities, safeguarding their messaging processes from exploitation.

For instance, in the context of the gaming industry, where innovation thrives but fraud risks also escalate, businesses have sought more robust security measures. In response, they have turned to SMS-based one-time passcode verification, adding an extra layer of security without compromising user accessibility. This approach enables companies to ensure a safer and more reliable user experience while protecting sensitive user information.

One of our beta customers, a large social media business, deployed our solution designed to detect and block AIT, Fraud Guard, and saw a 27% increase in their SMS conversion rate, a 42% decrease in cost-per-user, and they saved more than $300k in the first month with an anticipated $1.57M savings over time.

How does it work? Great question: Fraud Guard uses machine learning algorithms to identify suspicious behavior that could be associated with AIT. For example, we’re able to identify abnormal requests like 25 OTPs requests in just one minute. To ensure we’re catching anomalies like this, Fraud Guard leverages the Twilio Supernetwork to learn from all the aggregate OTP data to assess what a normal behavior looks like.

Multi-channel verification

For organizations aiming to send OTPs or implement phone number verification seamlessly, they should consider a multi-channel verification API. Designed with scalability and high deliverability in mind, this approach ensures redundancy and low latency, critical for maintaining optimal user experiences.

By adopting this solution, businesses can expand their global reach while effortlessly managing carrier pre-approved templates, compliance, and a pool of phone numbers, short codes, and long codes. Any solution you choose should also provide robust monitoring capabilities, and offer valuable insights through an intuitive console.

In addition to Fraud Guard on Twilio’s Verify API, businesses can also use SMS Pumping Protection to prevent SMS pumping fraud when using the Programmable Messaging API for verification as well as other use cases, such as promotional messaging. This product is currently in private beta and to be released publicly in September 2023. Like Fraud Guard, Twilio’s SMS Pumping Protection offering uses machine learning to monitor traffic and identify messages it suspects are fraudulent. It’s able to accomplish this by comparing the current activity with historical data that we have. Once the engines can identify the anomalies, it blocks the traffic so that the fraudulent messages don't get sent.

It’s critical that you have a strong messaging fraud strategy to both counteract fraudulent activities and ensure that you have the appropriate layers of protection. If you’re curious how much fraud is costing you, try out our Fraud Calculator.

To sum it up

In summary, artificial intelligence presents a powerful arsenal for companies in the battle against fraud. Establishing seamless customer identity verification processes, while simultaneously deploying AI to detect and prevent fraudulent activities like artificially inflated SMS traffic, enables businesses to provide secure and efficient customer experiences. This proactive approach helps build trust among customers and safeguards the company's financial interests in an increasingly digital landscape.