Recently, Capital One and industry titans Adyen and Stripe announced a new alliance.

Through the introduction of Direct Data Share (DDS), a free and open-source technology, the partnership seeks to address the rising threat of fraud. The goal of this project is to improve real-time authorization decisions so that merchants experience fewer erroneous rejections and fraud losses.

This relationship has to happen now. By 2027, it is predicted that fraud losses worldwide would reach an astounding $343 billion. In addition to causing large financial losses, fraudulent activity and decreases damage the reputation and consumer trust of the impacted merchants. With the ability to facilitate over $1 billion in merchant transactions that would have otherwise been lost, Capital One's DDS solution has already shown to be effective.

According to Capital One Head of Fraud Strategy Jon Borman, the fintechs' collaboration has allowed over $1 billion worth of transactions that otherwise would have been rejected to be approved: About the collaboration, he remarked, "They're trying to stop fraud on their side, too, both for financial reasons as well as because this is criminal activity that we're preventing."

"We realized that we share the exact same business model, which allows us to collaborate and combat fraud," the speaker said.

The Operation of Direct Data Sharing

DDS is revolutionizing the industry. Capital One is building a strong network to detect and stop fraudulent transactions across several platforms by granting Adyen and Stripe access to its Direct Data Share API. For example, the system can stop a transaction in real time if Capital One identifies fraud at a Stripe merchant and observes the same IP address trying to complete a transaction at an Adyen merchant. The API assists in preventing false declines by exchanging proof of a positive customer history, guaranteeing that valid transactions are not inadvertently stopped.

There are concerns about Capital One's intentions with relation to its Discover network raised by this agreement. The action shows a dedication to forging solid alliances with acquirers and merchants. It represents a change toward a fraud prevention strategy that is more inclusive and collaborative.

Borman continues, "We love this partnership because we can succeed together." "Just as Capital One's cardholders benefit from fewer false positive declines and less fraud, Adyen's merchants gain from greater authorization rates and fewer chargebacks.”

Although the DDS project is a big step forward, if it goes beyond Capital One will determine how it will affect things in the long run. Similar open-source APIs might have enormous benefits if other networks and financial institutions embrace them, making e-commerce safer and more easy for all. On the other hand, there may be less potential for general fraud prevention if DDS is restricted to Capital One.