Fintech
When enemies become friends: Capital One partners with fintech giants Stripe and Adyen to prevent fraud
The tension between incumbents and fintechs has existed for decades. But every now and then, the two groups decide to put aside the competition and work together.
In an unusual move, Capital One is teaming up with payments giants (and rivals) 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 created models to protect its customers from fraud, it stalled because it simply “didn’t have enough data,” said head of anti-fraud strategy Jon Borman.
So he created an open source project called Direct Data Share, which Borman says is an API that allows merchants or anyone in the payment stack to send transaction data in real time. This is especially useful for e-commerce transactions, which he described as “pretty dangerous” compared to in-person purchases where a user verifies, for example, the chip on a credit card.
With Direct Data Share, every time an online purchase was made, “a bunch of data” passed 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, identifying fraud across its 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 to Adyen and vice versa,” Borman told TechCrunch.
Merchants win, he said, because more fraud should be identified. Global losses related to e-commerce fraud are expected to increase 343 billion dollars by 2027, according to a study by Juniper Research.
But that should also mean fewer false declines, when a card or transaction is flagged but shouldn’t be. And merchants pay no additional fees for protection. So far, Borman said the partnership with fintechs has led to approvals of more than $1 billion worth of transactions that would have been rejected.
“They’re trying to stop fraud on their end as well, both for financial reasons and because it’s a criminal activity that we’re preventing,” he said of Stripe and Adyen. “So we had this light bulb moment where we realized we have exactly the 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 is able to 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 clearance rates, “it was an easy decision,” Trevor Nies, Adyen’s senior 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 positive declines and less fraud.”
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