Enhancing E-Commerce Security: How AI is Transforming Fraud Prevention

Table of Contents

1. Key Highlights:
2. Introduction
3. The Limitations of Traditional Fraud Prevention
4. Advancements in AI-Powered Fraud Detection
5. Case Study: TickPick's Experience with Adaptive Checkout
6. The Technology Behind Adaptive Checkout
7. The Future of Fraud Prevention in E-Commerce
8. Key Takeaways from Riskified's Approach
9. FAQ

Key Highlights:

• Riskified's Adaptive Checkout tool utilizes AI to effectively minimize fraud and reduce false declines for online merchants.
• The tool has significantly benefited TickPick, an online ticket marketplace, by improving order approvals and boosting revenue.
• This article is part of the CXO AI Playbook series, showcasing insights from business leaders on the practical applications of AI in their operations.

Introduction

In an era where online transactions dominate commerce, the challenge of fraud prevention has become increasingly sophisticated. E-commerce businesses often grapple with the dual threat of fraudulent transactions and the potential loss of legitimate sales due to false declines. Traditional fraud detection methods, which typically rely on binary decision-making, are inadequate in navigating the complex landscape of online transactions. Enter Riskified, a New York City-based software company that is redefining fraud management through its innovative AI-powered Adaptive Checkout tool.

This article explores how Riskified is leveraging artificial intelligence to enhance the security of e-commerce transactions, focusing on its successful collaboration with TickPick, an online ticket marketplace that has experienced substantial benefits from this revolutionary approach.

The Limitations of Traditional Fraud Prevention

Historically, fraud prevention systems have operated on a simplistic basis: they either approve or decline transactions based on a set of predefined criteria. While this model may work in some scenarios, it often falls short in a rapidly evolving marketplace where fraud tactics are constantly adapting. Jeff Otto, Riskified's Chief Marketing Officer, points out that traditional yes-or-no answers can be misleading. Sometimes they correctly identify fraud, but often they erroneously decline legitimate transactions, resulting in significant financial losses for businesses.

For companies, the consequences of false declines extend beyond immediate revenue loss. Each declined transaction can lead to a frustrated customer who may choose not to return, thereby damaging the company's reputation and eroding customer trust. As businesses increasingly rely on online sales, the need for more nuanced and dynamic fraud prevention methods is paramount.

Advancements in AI-Powered Fraud Detection

In response to the limitations of traditional systems, Riskified has developed the Adaptive Checkout tool, a sophisticated AI solution designed to analyze transactions in real time. Officially launched in March 2025, this tool allows merchants to make informed decisions about each transaction based on a comprehensive evaluation of risk factors rather than a binary judgment.

The Adaptive Checkout tool represents a significant advancement from Riskified's previous offerings. It not only aims to reduce false declines but also seeks to enhance overall revenue for merchants by ensuring that more legitimate transactions are approved. By incorporating machine learning algorithms, the tool continuously learns from transaction data, improving its accuracy over time.

Case Study: TickPick's Experience with Adaptive Checkout

TickPick, an online marketplace where users can buy and sell tickets for concerts, sports events, and other live performances, has been at the forefront of testing the Adaptive Checkout tool. The platform often handles high-value transactions, including tickets priced at up to $20,000 for highly sought-after events like the Super Bowl.

Understanding the critical balance between fraud prevention and customer retention, TickPick embraced the Adaptive Checkout tool during its testing phase in November 2024. The company's experience illustrates the practical application of AI in reducing fraud risk while ensuring the approval of legitimate orders. With high-stakes transactions, it is essential for TickPick to maintain a seamless purchasing process to avoid alienating valuable customers.

According to Otto, the results from TickPick's implementation of Adaptive Checkout have been promising. The tool's advanced capabilities have allowed TickPick to approve more orders, thereby increasing overall revenue and customer satisfaction.

The Technology Behind Adaptive Checkout

At the heart of Riskified's Adaptive Checkout tool is a robust machine learning framework that leverages vast datasets to make informed assessments about transaction legitimacy. The system analyzes a multitude of factors, including user behavior, transaction history, and even device information, to discern patterns indicative of fraud.

This data-driven approach contrasts sharply with traditional methods, which often rely on static rules that cannot adapt to new fraud tactics. By continuously learning from new data, Adaptive Checkout is better equipped to identify emerging threats and adjust its algorithms accordingly.

The integration of AI not only improves detection rates but also enhances operational efficiency for merchants. With accurate fraud detection, businesses can focus on delivering exceptional customer experiences rather than grappling with the aftermath of false declines.

The Future of Fraud Prevention in E-Commerce

As e-commerce continues to expand, so too will the sophistication of fraud tactics. Businesses must stay ahead of the curve by adopting innovative solutions that not only protect against fraud but also foster customer trust. Riskified's Adaptive Checkout is a prime example of how technology can bridge the gap between security and customer experience.

The future of fraud prevention lies in the proactive adaptation of tools like Adaptive Checkout, which empower merchants to make real-time decisions based on comprehensive data analysis. As more companies recognize the value of AI in enhancing their fraud prevention strategies, the landscape of e-commerce security will continue to evolve.

Key Takeaways from Riskified's Approach

1. Dynamic Decision-Making: The shift from binary decision-making to AI-driven, data-informed assessments allows for more accurate fraud detection.
2. Revenue Growth: By minimizing false declines, merchants can capture more legitimate sales, ultimately increasing revenue.
3. Customer Retention: A seamless purchasing experience enhances customer satisfaction and loyalty, particularly in high-stakes transactions.

FAQ

What is Riskified's Adaptive Checkout tool? Riskified's Adaptive Checkout is an AI-powered fraud detection tool that analyzes online transactions in real time to determine their legitimacy, thereby minimizing false declines and maximizing revenue for merchants.

How does the Adaptive Checkout tool work? The tool employs machine learning algorithms to assess various data points related to a transaction, including user behavior and transaction history, allowing for more informed decision-making compared to traditional binary systems.

What benefits has TickPick experienced from using Adaptive Checkout? TickPick has reported increased order approvals and revenue growth since implementing the Adaptive Checkout tool, demonstrating its effectiveness in managing high-value transactions without compromising customer experience.

Why is traditional fraud prevention inadequate? Traditional fraud prevention methods often rely on rigid rules that cannot adapt to evolving fraud tactics, leading to both false declines of legitimate transactions and missed opportunities for revenue.

What does the future hold for fraud prevention in e-commerce? The future of fraud prevention is likely to see increased reliance on AI-powered solutions that offer dynamic, data-driven assessments to enhance both security and customer experience in the expanding e-commerce landscape.