On Monday, Mastercard revealed to an exclusive audience that it has teamed up with regulatory technology platform Feedzai to enhance fraud monitoring and blocking in the cryptocurrency space.
Feedzai will be integrated with the CipherTrace Armade platform from Mastercard, which helps banks check transactions from more than 6,000 cryptocurrency exchanges for fraudulent activity.
With this action, Mastercard is making a significant effort to combat fraud and scams in the cryptocurrency space.
Mastercard is increasing the amount of work it does to identify and stop fraud that passes through cryptocurrency exchanges.
The business exclusively revealed to CNBC that it has teamed up with Feedzai, a regulatory technology platform that uses artificial intelligence to fight online financial scams and money laundering.
Feedzai will directly interface with Mastercard’s CipherTrace Armada platform through this partnership. Banks use this platform to monitor transactions from over 6,000 cryptocurrency exchanges for fraudulent activity, money laundering, and other suspicious activity.
Rather than being accessed through an API, or application programming interface, CipherTrace Armada will be directly integrated into Feedzai’s technology, allowing Feedzai to “inhale” the data and provide real-time alerts about suspicious crypto transactions.
Nuno Sebastio, the CEO and co-founder of Feedzai, told CNBC that “this will increase fraud detection by protecting unwary consumers, but will also detect potential money laundering activity and mule accounts.” Users’ accounts known as “mule accounts” are those that scammers use to transfer money they have obtained illegally.
According to Feedzai data, approximately 40% of scam transactions nowadays go straight from a bank account to a cryptocurrency exchange.
Mastercard will have access to Feedzai’s artificial intelligence expertise as a result of the partnership. In a matter of nanoseconds, Feedzai claims that its software can detect and stop suspicious transactions while simultaneously identifying legitimate ones.
Every year, Feedzai’s RiskOps platform examines transactions totaling more than $1.7 trillion. With joint headquarters in San Mateo, California, and Coimbra, Portugal, the company protects its technology with nearly 100 patents, securing an average of 10 patents annually.
“Many banks that think they are stopping illicit cryptocurrency transactions are actually only stopping transactions involving the well-known and regulated companies in the space and leaving out everything else,” Sebastio stated.
Is cryptocurrency making a comeback?
With this action, Mastercard is attempting to establish cryptocurrency as a legitimate financial asset that can be governed by the same laws and regulations as more conventional assets.
Large financial institutions like banks are becoming more interested in integrating cryptocurrency into their offerings. However, integrating widely accessible cryptocurrency products into their main offerings—the next stage—has proven to be more difficult to achieve.
Because digital assets are not fully regulated and can be used in fraud and scams, banks have been cautious when dealing with them.
According to data from blockchain analysis firm Chainalysis, the amount of theft and scams caused a 79% global increase in crypto-related losses from the year before. Comparatively speaking, illicit addresses received $14 billion in 2022—nearly twice as much as they did in 2020.
Banking institutions all over the world process and profit from payments using Mastercard’s extensive network.
The business is in competition with Visa, a major player in the payments industry that supports card payments in addition to other fintech services.
Banks in the United Kingdom have demonstrated reluctance to be linked to cryptocurrency. Citing the possibility of fraud, several bigger lenders have stopped allowing transactions with cryptocurrency exchanges on their networks.
Prominent financial institutions like HSBC, JPMorgan, and NatWest have prohibited or limited cryptocurrency transactions. Brian Armstrong, CEO of Coinbase, expressed disapproval of this, stating that it went against the United Kingdom’s goal of being a major global “Web3” hub.
According to Ajay Bhalla, president of Mastercard’s cyber and intelligence solutions, “risk as well as opportunity has been brought about by the interconnectedness of life today and increasing digital penetration of finance,” as stated to CNBC.
Bhalla stated via email that “our most recent data demonstrates fraud on transactions where people are buying crypto is 5 times higher than regular fiat transactions.” She also added that financial institutions will “be able to tell good transactions from bad” thanks to Mastercard’s new partnership with Feedzai.
The collaboration expands upon Mastercard’s acquisition of the US blockchain switching company CipherTrace. After purchasing CipherTrace in 2021, Mastercard introduced CryptoSecure, the company’s first product that uses the technology to scan and prevent transactions from cryptocurrency exchanges that are known for fraud, the following year.
