The tension between incumbents and fintechs has existed for decades. But every now and then, the two teams decide to put aside their rivalry and work together.
In an unusual move, Capital One is partnering with payments giants (and competitors) Stripe and Amsterdam-based Adyen to offer a free product aimed at reducing fraud, the financial services giant told TechCrunch in an exclusive interview.
While Capital One has built models to protect its customers from fraud, it was stuck because it simply “didn’t have enough data,” said chief fraud strategist Jon Borman.
So it created an open source project called Direct Data Share, which Borman said is an API that allows merchants or anyone in the payments stack to send transaction data in real time. This is particularly useful for e-commerce transactions, which he described as “pretty insecure” compared to in-person purchases where a user verifies the chip on a credit card, for example.
With Direct Data Share, every time an online purchase was made, “a bunch of data” was piped through Capital One’s API to the bank, which would be used to help prevent fraud for more customers and merchants, he said.
But by partnering with Stripe and Adyen with Direct Data Share, Capital One can act as a data clearinghouse, detecting fraud across their tracks.
“If we see an IP address through Stripe that turns out to be fraudulent, we can now use that same IP address to prevent fraud for transactions that happen on Adyen and vice versa,” Borman told TechCrunch.
Merchants win, he said, because more fraud has to be detected. Global losses from e-commerce are expected to increase 343 billion dollars by 2027, according to a study by Juniper Research.
But it should also mean fewer false declines, when a card or transaction is flagged when it shouldn’t be. And merchants don’t pay extra fees for protection. So far, Borman said working with fintechs has resulted in more than a billion dollars worth of transactions being approved that would have otherwise been rejected.
“They’re trying to stop fraud on their end, both for financial reasons and because that’s criminal activity that we’re preventing,” he said of Stripe and Adyen. “So we have this lightbulb moment where we realize we have the exact same business model so we can work together and fight fraud.”
Capital One has been working with Stripe on this offering since early 2023, but only recently began working with Adyen.
Specifically in the case of Stripe, Capital One through its API can receive fraud scores from Stripe’s Radar product which it says will help it improve accuracy during the transaction authorization process.
When Capital One approached Adyen with a solution to improve authorization rates, “it was an easy decision,” Trevor Nies, Adyen’s vice president and global head of digital, told TechCrunch.
“We love this partnership because we can succeed together,” he added. “Adyen merchants benefit from higher authorization rates and fewer chargebacks, just as Capital One cardholders benefit from fewer false positives and less fraud.”
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