A deep dive into credit card networks, fraud detection, and artificial intelligence - driven risk assessment

Credit cards are often regarded as the most convenient and universal payment method. Therefore, it is not surprising that the credit card network industry is a multi-trillion-dollar market, responsible for more than 25% of the GDP of many developed countries. Today, the main players in the credit card network industry are Visa, Mastercard, and AMEX. These companies provide payment processing solutions, by putting in place a system that connects consumers, merchants, banks that support consumers, banks that support merchants, and companies that secure the credit card network (Chen & Zhang, 2021; Gupta & Singh, 2022; Kim & Lee, 2023).

More concretely, when a customer decides to pay for a purchase with a credit card, he/she presents the credit card to the merchant, who in turn sends the credit card information to the payment processor. The processor contacts the customer’s bank, and this bank verifies that the card is not reported lost or stolen, that the credit limit is not exceeded, and that the customer has enough money to pay for the purchase. If these checks are ok, the merchant receives the confirmation and the transaction is completed. Then, the funds are moved from the customer’s bank to the merchant’s bank. This all happens in a matter of seconds. The fact that this entire system works smoothly is the result of years of technological innovation and work that many professionals dedicated to this purpose (Li & Wang, 2020; Narayan & Bannigidadmath, 2020).