Mastercard is increasing its efforts to stop fraud in cryptocurrency exchanges. They’re teaming up with Feedzai, a tech platform that fights online money laundering and scams using artificial intelligence. Feedzai will work closely with Mastercard’s CipherTrace Armada platform, helping banks keep an eye on transactions from more than 6,000 crypto exchanges to catch fraud, money laundering, and other suspicious activities.
In this partnership, Feedzai will directly connect with Mastercard’s CipherTrace Armada platform. This platform helps banks keep an eye on transactions from more than 6,000 crypto exchanges to catch fraud, money laundering, and other suspicious activities.
Instead of using an API (application programming interface), Feedzai will integrate CipherTrace Armada directly into its technology. This means that Feedzai will quickly analyze the data, allowing for real-time alerts about suspicious crypto transactions.
Feedzai’s Role in Fraud Detection
According to Feedzai CEO Nuno Sebastio, this approach will not only enhance fraud detection to protect consumers but also identify potential money laundering activity and mule accounts. Mule accounts are accounts that fraudsters exploit to launder their unlawfully obtained funds.
Approximately 40% of fraudulent transactions currently go straight from a bank account to a crypto exchange, as per data from Feedzai.
Through this collaboration, Mastercard will also gain access to Feedzai’s advanced artificial intelligence capabilities. Feedzai’s software can quickly identify and prevent suspicious transactions within nanoseconds, while still recognizing legitimate ones.
Feedzai’s RiskOps platform examines transactions totaling over $1.7 trillion each year. With headquarters in Coimbra, Portugal, and San Mateo, California, in Silicon Valley, the company holds nearly 100 patents and secures an average of 10 patents annually to protect its technology.
Nuno Sebastio, CEO of Feedzai, pointed out that some banks, thinking they’re blocking illegitimate cryptocurrency transactions, are actually only preventing transactions involving well-known and regulated entities in the crypto space, leaving out others.
Crypto Entering the Mainstream?
Mastercard’s action signals a step into the realm of establishing cryptocurrency as a mainstream financial asset, subject to the same regulations and compliance frameworks as traditional assets.
While banks and major financial institutions have been exploring cryptocurrency in their offerings, incorporating commercially available crypto products into their core services has been challenging. The hesitation arises from concerns about the limited regulations surrounding digital assets and their susceptibility to fraud and scams.
In the past year, theft and scams in the crypto space caused a global surge of 79% in losses compared to the previous year, as reported by blockchain analysis firm Chainalysis. Illicit addresses received $14 billion in 2022, nearly double the amount in 2020.
Mastercard’s extensive network is globally utilized by banking institutions for processing and monetizing payments. The company faces competition from Visa, another major player in payments, engaged in supporting card transactions and various fintech services.
Cryptocurrency Transactions and Mastercard’s Strategic Moves
In the United Kingdom, banks have been cautious about associating with cryptocurrencies. Some prominent lenders have stopped transactions with crypto exchanges on their networks, citing concerns about the risk of fraud.
Major banks like JPMorgan, NatWest, and HSBC have either limited or blocked crypto transactions. Coinbase CEO Brian Armstrong criticized this move, expressing concern that it contradicted the U.K.’s aspiration to become a global “Web3” hub.
Ajay Bhalla, the President of Cyber and Intelligence Solutions at Mastercard, explained that the increasing digital presence in finance brings both risks and opportunities. He shared via email that their latest data reveals a fivefold increase in fraud for transactions involving the purchase of cryptocurrencies compared to regular fiat transactions.
Bhalla added that, with Mastercard’s new partnership with Feedzai, financial institutions will now be equipped to distinguish between good and bad transactions.
The collaboration expands on Mastercard’s acquisition of CipherTrace, a U.S. blockchain investigation firm. Mastercard completed the purchase of CipherTrace in 2021 and, in the subsequent year, introduced its first product utilizing the firm’s technology. This product, named CryptoSecure, is designed to analyze and prevent transactions from crypto exchanges susceptible to fraud.
Mastercard’s partnership with Feedzai signals a significant move in combating fraud in cryptocurrency exchanges. With an emphasis on real-time analysis and detection, this collaboration aims to enhance consumer protection and identify potential money laundering. The joint efforts also align with Mastercard’s strategic advancements, indicating a growing acceptance of cryptocurrency within mainstream financial frameworks.