The tension between incumbents and fintechs has existed for decades. But every once in a while, the two groups decide to put their competition aside and work together.
In an unusual move, Capital One is teaming up with payment giants (and rivals) Stripe and Amsterdam-based Adyen to offer a free product aimed at fraud reduction, the financial services giant told TechCrunch in an exclusive interview.
While Capital One has built models to protect its customers from fraud, it was getting stuck because it just “didn’t have enough data,” said head of fraud strategy Jon Borman.
So it built an open source project called Direct Data Share, which Borman said is an API that allows merchants or anyone in the payment stack to send real-time transaction data. This is particularly useful for e-commerce transactions, which he described as “pretty unsafe” compared to in-person purchases where a user is verifying the chip on a credit card, for example.
With Direct Data Share, every time an online purchase was made, “a bunch of data” flowed 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 like a data clearinghouse, identifying fraud across all of their rails.
“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 happening at Adyen, and vice versa,” Borman told TechCrunch.
Merchants win, he said, because more fraud should be identified. Global e-commerce fraud losses are expected to spike to $343 billion by 2027, according to a study by Juniper Research.
But it should also mean fewer false declines, when a card or transaction is flagged but shouldn’t be. And merchants pay no extra fees for the protection. So far, Borman said that the partnering with the fintechs has resulted in the approval of over a billion dollars’ worth of transactions that would have been declined.
“They’re trying to stop fraud on their side, too, both for financial reasons, as well because this is criminal activity that we’re preventing,” he said of Stripe and Adyen. “So we had this light bulb moment in that we realized 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 collaborating with Adyen.
Specifically in the case of Stripe, Capital One through its API is able to receive fraud scores from Stripe’s Radar product that 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 SVP and global head of digital, told TechCrunch.
“We love this partnership because we can succeed together,” he added. “Adyen’s merchants benefit from higher authorization rates and fewer chargebacks just as Capital One’s cardholders benefit from fewer false positive declines and less fraud.”
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