Payments Fraud is an Identity Problem, Not a Transaction Problem

Editorial Calendar Payments Fraud is an Identity Problem, Not a Transaction Problem The contributed piece below argues that all of those layers share a weakness: they watch what a user does once inside the system, while the question of who that user is was answered once, at onboarding, if at all. Its author writes from Canada, where provincial digital identity schemes, a new national standard and an approaching real-time payments rail make the country a useful test of whether identity infrastructure can do what transaction monitoring has not. Paul Twiggis chief technology officer ofDigital Commerce Group (DCG), a Canadian payments company, and has spent his career building and operating payments infrastructure.

The article that follows sets out his opinion. Every year, the payments industry invests billions in fraud detection: smarter AI models, more sophisticated transaction monitoring, seven-layer security frameworks that track device fingerprints, flag velocity anomalies and score behavioural patterns in milliseconds. And yet fraud keeps coming and the losses keep climbing.

After years spent building and operating payment infrastructure, my view is that we have been fighting this battle at the wrong layer. Most fraud is not a transaction problem. It is an identity problem.

We do not know with certainty who is on either end of a digital payment. Everything else we build, the detection tools, the controls and the AI, is compensation for that foundational gap. Until those that govern the payments industry are willing to confront that reality, we will keep running faster on the same treadmill.

Ask any bank or payment processor how they fight fraud and you will hear a familiar answer: a layered approach. Industry frameworks involve defensive layers from scam detection and customer education at the front end, through to multi-factor authentication, session monitoring, and real-time transaction rule and pattern analysis further