Banks and vendors are collaborating to fight fraud through a program organized by the Financial Services Technology Consortium.
The New York trade group said this month that it had completed the first phase of its Fraud Collaboration Project, a joint effort that involved 20 banks, vendors, nonprofit groups, and other organizations in the financial services industry.
"There [are] huge amounts of fraud being experienced globally relative to financial transactions," said Jim Pitts, the consortium's managing executive. "A lot of the efforts to combat that fraud are in a noncollaborative environment," even within individual institutions, he said. "We're working on the idea of creating collaboration not only within institutions and organizations but also between institutions and organizations."
The first phase, which began in August, was focused on context and communication; project participants created a preliminary glossary of terms and a taxonomy of fraud techniques applicable throughout the financial services industry. Participants also documented fraud prevention techniques in use today and the regulations that banks must adhere to when dealing with fraud issues.
Six banks participated in this phase, including U.S. Bancorp, Comerica Inc., and Royal Bank of Scotland Group PLC's Citizens Financial Group Inc. Mr. Pitts said the consortium is seeking more banks for the second phase, which is to run four to seven months and focus on collecting fraud-loss data. At least three phases are planned, he said, and as the work goes on the consortium seeks to include "some of the corporate entities that are being tremendously affected by fraud."
The ultimate goal is to "be able to pull data together and share data from systems that are disparate today," he said.
Banks have long been reluctant to share this kind of information, and Mr. Pitts said that, because the project wants data from multiple sources, it must make the data anonymous to ensure privacy.
Collaboration is especially important because fraudsters are already working together to steal money from banks, Mr. Pitts said. "We're battling criminal organizations that are also out there adapting and moving their capabilities forward," he said. "At the very least, I almost believe this kind of effort" by banks and vendors "is going to be required to keep up."
Avivah Litan, a vice president and research director at the Stamford, Conn., market research company Gartner Inc., said that collaboration among banks is unusual but not unique.
BITS, the technology arm of the Financial Services Roundtable, and the bank-owned Emergency Warning Service LLC have fostered collaboration in the anti-fraud space, she said.
She also said that many banks foster little internal communication on fraud issues even when they span business lines. "It really is a siloed effort in banks, so the online banking folks don't work with call center folks," and the credit card and deposit account lines do not interact, she said.
However, fraudsters do not work that way. "The crooks don't go into one product or one channel," she said, and "most banks are not prepared to deal with that."
