August 2025 Summaries

An analysis of multifactor authentication trends in regulated markets, focusing on the European Economic Area, the UK, and Japan, reveals that high conversion rates can be maintained even with stringent authentication requirements. Contrary to the belief that friction from two-factor authentication hinders conversion, data suggests that the quality of authentication implementation is more impactful than its frequency. In France, issuers challenge transactions more rigorously than in other EEA markets but still achieve high conversion rates due to a cultural familiarity with secure authentication methods. The UK's success in balancing authentication with low friction and high challenge rates is attributed to its advanced payment infrastructure and strategic use of exemptions. Japan's recent adoption of 3DS mandates shows that effective execution can reduce fraud and sustain high conversion rates, as evidenced by a 93% average conversion rate and lower dispute rates. The analysis suggests that businesses should tailor their authentication strategies to specific market conditions rather than adopting a one-size-fits-all approach, and highlights the potential benefits of using AI-driven optimizations to enhance authentication processes.

AI has revolutionized fraud management for businesses, transitioning from manual transaction reviews to machine learning models that analyze signals in real time. A survey of over 4,000 payments leaders revealed that 47% of businesses now use AI for fraud detection and prevention, making it the most popular AI application in payments, with insurance, SaaS, and travel industries leading the way due to their complex processes and high-value transactions. SaaS platforms and marketplaces, in particular, report higher-than-average AI adoption rates because they face rapid fraud evolution, transaction, and merchant fraud, necessitating sophisticated tools to manage risk. As these sectors grow and onboard more users, the need for scalable AI solutions becomes increasingly critical to tackle the complexity and volume of fraud challenges. The report further explores how AI has exacerbated certain types of fraud and offers predictions for the future of AI in fraud management.