Bank fraud comes with a heavy price tag to financial institutions and their customers. As the nature of banking changes, the methods of combating fraud must also evolve.
Customers can now transfer funds using their smart phones from any location around the globe, for example. This provides speed and convenience for the consumer; however, every new channel that enhances the customer experience opens the door for new ways of committing fraud.
On banks’ ever expanding list of priorities this one ranks high for many reasons - protecting consumers, curtailing losses and bank reputation management - to name a few.
We live in a world where instant gratification translates into high satisfaction for the end user. Everything is faster, including banking transactions. As the speed of those transactions increases, so does the importance of real-time fraud detection.
Banks are going to be attacked by organized crime groups, skimming and phishing schemes. The key is to be prepared when fraud attempts are made.
Banks need to employ strategies, supported by technology that will allow them to detect fraud and respond quickly so that customer transactions are not impacted negatively. Integrating systems and utilizing real-time tools can give consumers the speed they desire, while protecting the institution and its customers against fraud.
Comprehensive Fraud Management Strategies
A layered security approach that includes multifactor authentication, device identification and transaction monitoring is part of a solid defense against fraud.
Device identification uses technology to verify that the device is the one that the customer has used in the past to perform banking transactions. This process involves using software that takes a snapshot of the computer’s configuration based on the IP address, browser and physical location of the customer’s PC or mobile device and reports back to the financial institution.
Because customers often change their configuration and fraudsters might work around these security measures, the technology must be able to adapt quickly.
If the device isn’t recognizable, then security questions or images and out-of-band authentication can be used for further protection against fraudulent transactions. Device reputation is yet another check point.
If the same device has been used to apply for several credit card accounts on the same day under different names, then it shouldn’t be trusted.
Transaction profiling and predictive analytics also help banks detect and prevent losses. I had an experience recently that shows how a lack of integration of services creates a gap in effective fraud management.
On a business trip in Florida, I filled my rental car with gas using my credit card. In response, the credit card company called and left a message on my home phone (in Montana) reporting that my card may have been used for a fraudulent transaction.
Unfortunately, I received the message a week later when I returned from my trip. Had the credit issuer called my cell phone or sent me an email, I would have known immediately that there might be a problem with my card.
Luckily there wasn’t cause for alarm in this case, but if my card had been compromised the fraudster could have run up thousands in charges before I realized it. Sending transaction alerts engages customers in the fight against fraud as part of a well rounded strategy, but it must be done intelligently.
In addition, it is essential to regularly monitor the success of fraud programs, making updates when necessary, to ensure they are keeping pace with fraudsters’ tactics. At a minimum banks’ architecture and solutions must be able to:
• Incorporate key data points into analytics to evaluate data in realtime; flagging potential fraud quickly.
• Support multi-channel integration to gain a complete view of each customer to better detect cross-channel fraud threats.
• Provide business users with the tools to change decisioning rules/fraud policy quickly without waiting on internal IT or a vendor.
Not every solution is capable of simultaneously addressing integration, layered security and speed. A careful selection process utilizing a proof of concept or trial period can ensure a truly effective approach to fraud management.
Sacrifice Nothing
It is challenging to decision transactions quickly and accurately with both fraud stringency and the customer experience in mind, but it can be done with the right tools in place.
In today’s fast-paced world it is no longer acceptable to rely solely on consumer and employee education and manual processes to detect and deter fraudulent acts.
Technology must be employed to integrate systems and automate processes. Without effective integration, no technology will be able to withstand the rigors of contemporary fraud attempts.
Fraud policy needs the capacity to be developed and modified in real-time to respond to the pace of today’s fraud threats. There are lenders that have incorporated sophisticated fraud prevention strategies, and are able to change their policy daily if necessary.
Lenders face challenges of providing real-time responses and a layered approach to security without compromising performance. Banks want every interaction a customer has with their institution to be a positive and consistent experience. There is no need to sacrifice speed in order to respond effectively and keep consumers protected in an ever-changing fraud environment.
Eric Lindeen is director of marketing at Zoot Enterprises.
