PayPal offering peace of mind to accelerate online commerce

By: Amaresh Mohan - Director, Risk Management, PayPal

The role of technology in the movement of money has evolved over the years. A few years back, India was still getting introduced to the concept of internet banking. However, with the advent of smartphones and penetration of 3G networks, the country has leapfrogged in to the era of mobile banking. While this has brought ease of payments to users, it has also surfaced fraud related issues such as unauthorized use of identity and financial information.

PayPal, with over 180 mn active customers across the globe, is a leading online payments company which provides protections against online fraud. When PayPal started, its technology was disruptive in nature, offering more secure and fast way of making payments online. 17 years later,  PayPal continues to be rated as one of the top financial services brand for customer trust and safety. This has been made possible by its world class risk management capabilities. It is also important to note that, unlike many financial services companies with risk capabilities built using ‘one size fits all’ systems, PayPal developed its risk management systems ground up leveraging the rich data on both buyers and sellers from its closed loop payments model.

PayPal’s risk management capabilities have evolved from being rule based risk decision system to a predictive and intelligent system combining data with context. PayPal has a unique story driven risk management approach coupled with deep expertise in data analytics to create risk solutions which can differentiate a fraud behavior from the intended good user behavior with great confidence. Let us take an example of a New York-based PayPal buyer who recently made a large purchase. However, the location of the buyer is shown as Thailand and the transaction was made at 2.00 am NY time. Automated systems tend to view this as case of stolen financials and, therefore, decline the transaction and lock such an account.

However, when we combine data analysis with human intelligence, we learn that the consumer had recently made a transaction at an airport and is probably on a vacation in Thailand. The transaction time is during the actual business hours in Thailand. With these real-time insights and automated capabilities, PayPal is able to approve such good transactions and save its good customers from bad experiences. All these complex algorithms to support such analysis run in a fraction of a second.

As the market leader in online payments, PayPal has the responsibility to constantly innovate to serve its customers in a fast evolving technological landscape. Anticipating growing mobile usage, PayPal invested heavily in building a robust mobile payments offering. Mobile payments were initially feared to attract more fraud activity. However, PayPal’s early investment in this area enabled it to harness device and geo-location data from mobile transactions and leverage it for risk decisions. As a result, PayPal’s loss rates on mobile transactions are now even lower than those on the web transactions.

E-commerce today presents a number of different risks to buyers and sellers. Buyers fear not receiving the goods and services they pay for while the sellers run the risk of payments being reversed due to stolen credit cards and bank accounts being used to make purchases. PayPal’s world-class risk management enables it to provide extensive protections to both buyers and sellers to create a safe payment ecosystem across the globe, thus enabling more commerce online. PayPal also actively collaborates with the rest of the payments industry players to develop new standards for safeguarding users’ identity and financial information.

According to market reports, India’s online payments system was ~$37bn in 2015 which is expected to increase by 4 times in the next 5 years.  As online payments grow in India at rapid pace, it would also attract attention from the fraudsters across the globe that are looking for newer markets to monetize stolen financial information from across the world. This creates a strong need to have a robust risk management system for India to keep the fraudsters out while offering a world-class customer experience and customer protections for good buyers and sellers.

PayPal offers Indian buyers protection against risks of non-delivery of eligible purchased items, discrepancies in items received, and any unauthorized payments. Sellers of many goods are protected from losses arising due to fraudulent buyers or items lost in transit. Starting July 2016, Indian sellers will also be covered for similar losses arriving on sale of eligible intangibles such as services.