Preventing fraud in a real-time digital future

Crim­i­nals move quick­ly. With new ways of engag­ing with finan­cial insti­tu­tions, from dig­i­tal bank­ing to chat­bots, fraud­sters find new attack vec­tors to harm cus­tomers. Fraud vol­umes have con­tin­ued to increase in recent years.

Since the begin­ning of the pan­dem­ic, appli­ca­tion fraud for new account open­ings has increased by over 134%. By 2023, syn­thet­ic iden­ti­ty fraud is fore­cast to make up over $1 bil­lion of annu­al fraud loss­es, accord­ing to research by Aite Group.

Today’s dig­i­tal chan­nels nat­u­ral­ly pro­duce more data. As open bank­ing brings even more play­ers into the pay­ments ecosys­tem, the pres­sure increas­es to ver­i­fy and authen­ti­cate legit­i­mate activ­i­ty. Fraud­sters adapt and are becom­ing more organ­ised, recog­nis­ing the need to become more tech­ni­cal­ly sophis­ti­cat­ed.

Fraud and finan­cial crime pro­grammes need to under­stand the new nor­mal and adapt quick­ly.
In this “new nor­mal”, cus­tomers are unlike­ly to migrate back to phys­i­cal branch­es. It is expect­ed that 85% of con­sumers who have used dig­i­tal plat­forms for finan­cial ser­vices will favour this form of inter­ac­tion post-pan­dem­ic, accord­ing to enter­prise fraud man­age­ment solu­tions provider NICE Actim­ize.

This shift­ing behav­iour is both an indi­ca­tion of the dig­i­tal mod­el of the future and a cat­a­lyst for dig­i­tal growth across the finan­cial ser­vices indus­try. It is also, unfor­tu­nate­ly, an oppor­tu­ni­ty for fraud­sters to prof­it from esca­lat­ing online activ­i­ty. It focus­es them on find­ing weak­ness­es in exist­ing fraud pre­ven­tion sys­tems. Appli­ca­tion or new account fraud, in which fraud­sters are using stolen or syn­thet­ic iden­ti­ties for crim­i­nal activ­i­ty, has emerged as one of the great­est threats to finan­cial insti­tu­tions.

“The pro­lif­er­a­tion of sophis­ti­cat­ed fraud schemes that utilise stolen and syn­thet­ic ID has inten­si­fied with the need of finan­cial ser­vices organ­i­sa­tions to adopt fric­tion­less, dig­i­tal-only new account open­ing process­es,” says Craig Costi­gan, CEO of NICE Actim­ize.

Tra­di­tion­al fraud pre­ven­tion and iden­ti­ty ver­i­fi­ca­tion solu­tions have fall­en short in address­ing com­plex fraud man­i­fest­ing from stolen or syn­thet­ic iden­ti­ties. With fraud­sters adapt­ing their tac­tics, finan­cial insti­tu­tions will require advanced ana­lyt­ics and real-time detec­tion to improve their dig­i­tal ser­vices and con­tin­u­ous­ly address diver­si­fy­ing, com­plex and well-orches­trat­ed fraud schemes.

Accel­er­at­ed dig­i­tal­i­sa­tion requires automa­tion
The accel­er­at­ed dig­i­tal­i­sa­tion of the last decade – and par­tic­u­lar­ly the last year amidst the pan­dem­ic – has left risk and com­pli­ance teams chal­lenged by grow­ing reg­u­la­to­ry scruti­ny and expec­ta­tions. Along with shift­ing con­sumer behav­iours, this has neces­si­tat­ed a dra­mat­ic change from slow man­u­al-inten­sive process­es towards more intel­li­gent automa­tion. Con­sumers want instant, accu­rate, con­ve­nient expe­ri­ences, and finan­cial ser­vices organ­i­sa­tions must be able to meet their cus­tomers’ expec­ta­tions for imme­di­a­cy and safe­ty, while adher­ing to rel­e­vant reg­u­la­tion. 

Real-time respon­sive­ness to a quick­ly evolv­ing fraud mar­ket is essen­tial to iden­ti­fy and mit­i­gate new forms of fraud before they result in rep­u­ta­tion­al, finan­cial and cus­tomer sat­is­fac­tion dam­age. To achieve this, finan­cial insti­tu­tions have realised the need to tran­si­tion from rules-based fraud detec­tion to next-gen­er­a­tion, advanced ana­lyt­ics that adapt in real-time, pre­vent­ing fraud before the cus­tomer is impact­ed.

When a cus­tomer begins a rela­tion­ship with a finan­cial insti­tu­tion, the com­pa­ny cre­ates an ini­tial pro­file. Cus­tomer behav­iours must be con­tin­u­ous­ly cap­tured and analysed so the pro­file remains accu­rate. Behav­iour­al ana­lyt­ics enables organ­i­sa­tions to under­stand cus­tomer pat­terns and dis­cov­er devi­a­tions in all activ­i­ties across all chan­nels. Organ­i­sa­tions have also realised that only by under­stand­ing nor­mal behav­iour can they accu­rate­ly inter­dict what is abnor­mal and anom­alous. Advanced ana­lyt­ics pow­ered by real-time data streams cap­tures and analy­ses behav­iours and activ­i­ties per­tain­ing to finan­cial crime, stop­ping fraud before a loss occurs.

With the finan­cial ser­vices indus­try expe­ri­enc­ing acute dis­rup­tion due to accel­er­at­ed dig­i­tal­i­sa­tion, data breach­es, a surge in con­tact­less pay­ments, and an inten­si­fy­ing threat land­scape, com­pa­nies must cap­i­talise on the ben­e­fits of arti­fi­cial intel­li­gence to strength­en fraud pre­ven­tion strate­gies. AI is a crit­i­cal force to effec­tive­ly fight and pre­vent finan­cial crime while remain­ing com­pet­i­tive in the mar­ket and deliv­er­ing a seam­less and trust­ed cus­tomer expe­ri­ence.

Finan­cial insti­tu­tions are data-rich, mak­ing it an ide­al domain for the strate­gic appli­ca­tion of AI and machine learn­ing to empow­er more respon­sive, col­lab­o­ra­tive and sophis­ti­cat­ed approach­es in the fight against per­va­sive fraud. An agile, end-to-end fraud pre­ven­tion plat­form with intel­li­gence from AI enables finan­cial insti­tu­tions to not only stop fraud faster, but also before it even starts, pre­vent­ing the impact to the cus­tomer.

The con­tin­u­ous self-learn­ing pro­vid­ed by com­pre­hen­sive, advanced ana­lyt­ics-based solu­tions ulti­mate­ly elim­i­nates frag­ment­ed approach­es to fraud pre­ven­tion and trans­forms fraud oper­a­tions to effi­cient­ly, holis­ti­cal­ly and proac­tive­ly mit­i­gate fraud, rapid­ly stop­ping a range of attacks.

Pro­tect­ing the cus­tomer life­cy­cle
Fraud can man­i­fest itself at any time across the cus­tomer jour­ney. To tru­ly pro­tect cus­tomers and safe­guard com­pa­ny assets, finan­cial insti­tu­tions have begun to take a holis­tic approach to fraud pre­ven­tion, begin­ning at the point of appli­ca­tion and con­tin­u­ing through­out the entire rela­tion­ship. At each point in the cus­tomer life­cy­cle, unique threats may man­i­fest them­selves.
What will fuel even greater accu­ra­cy and effec­tive­ness in fight­ing finan­cial crime is the win­ning com­bi­na­tion of AI, ana­lyt­ics and data intel­li­gence.

Finan­cial insti­tu­tions that cre­ate a more ful­ly inte­grat­ed, data-dri­ven and ana­lyt­i­cal approach to cus­tomer life­cy­cle risk man­age­ment, with holis­tic fraud pre­ven­tion with­in a sin­gle plat­form, will be able to more effec­tive­ly bal­ance the expec­ta­tions for a seam­less cus­tomer expe­ri­ence against the huge pres­sure to build bet­ter defences against finan­cial crimes.

Fraud man­age­ment is more than just stop­ping fraud loss. Fraud man­age­ment is about bal­anc­ing the risk of fraud against the need to exceed cus­tomer expec­ta­tions at every touch point in the cus­tomer jour­ney.

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