The banking industry has been dealing with fraud problems since 2019 (and even before that). In the middle of the financial ruckus are the financial institutions (FIs) that continually invest in fraud prevention technology. But instead of seeing a decrease in fraud cases, the opposite happens.
Bottom line: it’s an endless cycle of spending on fraud prevention and still seeing more fraud cases popping up.;
Aite Group’s study, Digital Channel Fraud Mitigation: Evolving to Mobile-First, reported that despite all the investments made for fraud prevention, fraud losses are up at 74 percent in the US.
The Problems with Fraud Prevention Technology
Nowadays, technology is a bank’s first line of defense when it comes to fraud prevention. Juniper Research’s report on online payment fraud revealed that financial institutions and merchants are willing to spend $9.3 billion on fraud prevention and detection tools by 2022. But one of the biggest hindrances that FIs face is the complicated computing environments that become more complex as they integrate newer technologies. As a result, FIs are struggling with their first line of defense.
Solutions overload is another challenge to overcome. Thousands of technology vendors sell security solutions to FIs, bewildering the latter with confusing value propositions and claims. For financial institutions, selecting the right vendor is difficult and time-consuming. The vendor approval process alone takes more than a year while implementation can take six months or longer. If the solutions do not work together, that’s a year wasted.
Fortunately, not all efforts dedicated to fraud detection and prevention are a waste of time and resources.
Intelligent Authentication: An Innovation
To prevent losing more money to fraud, financial institutions need a better approach, one that detects fraud in real-time and allows the extraction of cross-channel data. Also, FIs should take advantage of AI/machine learning, behavioral analysis, risk analytics and biometrics to ensure regulatory compliance, encourage the growth of online financial services and reduce fraud. They should also build more consumer trust across a variety of digital channels. Another option is to open platforms that use APIs to improve real-time decisions, connect to third-party data sources, boost the bottom line and improve consumer protection against fraud.
Intelligent authentication is a tech innovation that can simplify fraud prevention for financial institutions to achieve these goals (and more). It uses a comprehensive risk score according to the consumer’s behavior, as well as the integrity of mobile apps and devices.
Intelligent authentication can recognize bank customers and their transaction behavior. If there is unusual activity in a customer’s account, the device can recognize the attempt at fraud, as well as the possibility of a customer’s change in habits. Therefore, instead of denying the transaction, intelligent authentication will challenge the customer via security hurdles.
Preventing Fraud and Stay Ahead of the Competition
Nowadays, fraud prevention requires keeping up-to-date with recent technologies to help FIs improve their assessment and mitigation of emerging fraud schemes. By delivering a consistent and strong user-experience across digital channels, today’s financial institutions can bring new solutions to the market, continue growing revenue and consumer expectations – all designed to drive customer loyalty and service utilization.
Financial fraud is a tale as old as time. As anti-fraud technology evolves, so do fraudulent activities. For these reasons, financial institutions must remain vigilant.
These measures mentioned above must be done to help banks stay competitive and secure at the same time. There is much at stake for financial institutions if they do not resolve the issue of fraud ASAP. A bank’s credibility relies on its success. By implementing innovative and risk-based security measures against fraud, banks and financial institutions secure their good reputation among customers by reducing cases of fraud while meeting strict requirements.