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Stripe Inc. late Tuesday announced the launch of its Enhanced Issuer Network to help merchants reduce fraud and false positives and increase authorization rates. Card issuers within the network, which include Capital One Financial Corp. and Discover Financial Services, can incorporate Stripe Radar fraud scores into their own authorization tools. Capital One, for example, does so with its enhanced decisioning data application programming interface.
False positives occur when legitimate transactions are wrongly flagged as fraudulent, leading to unnecessary declines.
Stripe Radar, built into the Stripe platform, uses machine learning to assign each transaction a score from zero to 99 based on the risk that it’s fraudulent, with zero being the lowest risk and 99 the highest risk.
Risk factors are determined by data from card-issuing partners, payment data from transactions flowing through the Stripe platform, and data from checkout flows, such as buyer patterns from a merchant’s Web site or mobile app, to help detect suspect transactions. As a result, even if a card is being used for the first time with a merchant, Stripe says there’s a 91% chance its platform has previously seen the card. Using Stripe Radar in tandem with the information issuers already have can reduce fraud for merchants by 8% and increase their authorization rate between 1% and 2%, according to Stripe.
“With Capital One’s Enhanced Decisioning Data API, we can securely receive fraud scores from Stripe Radar that improve accuracy during the transaction-authorization process,” Sarah Strauss, head of customer services and strategy for Capital One, says in a prepared statement. “In particular, this makes legitimate transactions more likely to be approved. The partnership has already resulted in hundreds of millions of dollars in recovered revenue for businesses.”
False positives cost merchants in the United States more than $11 billion in lost revenue in 2021, according to data from the consultancy Aite-Novarica Group. In addition, 33% of consumers that have a transaction denied due to a false positive will shop with other merchants.
One merchant apparently benefiting from Stripe’s Enhanced Issuer Network is Substack, a Web site that enables independent writers and podcasters to publish directly to their audience and get paid through subscriptions.
“With Enhanced Issuer Network, Stripe is making sure as many legitimate transactions as possible are approved so that readers can subscribe to their favorite independent publications and writers can get paid,” Substack cofounder and chief technology officer Jairaj Sethi, says in a prepared statement.
