As Fraud Evolves in 2019, Banks Need Smarter Tools to Drive Success

Retail banks and financial services are facing challenges with a constant pace of digitization. Customers, on one hand, are increasingly demanding seamless yet secure digital experiences across multiple channels and mobile devices. They want banking to be quick, easy and always-on. But on the other side, fraudsters are using increasingly sophisticated tools and techniques to leverage the vast quantity of breached identity data flooding the dark web.

Legacy point solutions simply can’t cope with the speed at which modern financial services are delivered. That’s why financial institutions need real-time, adaptive decisioning to stay one step ahead of fraudsters while providing the high-quality digital banking experience that customers expect.

Fraud prevention for banks

A Digital Revolution

The ubiquity of mobile devices and disruptive fintech innovation is driving a revolution in banking. Customers want streamlined, user-friendly services that just work 24/7 wherever they are in the world. They want to transfer funds, open new accounts, apply for loans, and much more with just a few clicks or swipes.

At the same time, fraudsters have arguably never had it so easy – data breaches grew in scale, frequency and scope in 2018; exposing sensitive information of millions of consumers. Increasingly, fraudsters combine this personally identifiable information with fake data to create new or “synthetic” identities which legacy fraud solutions have difficulty spotting. As part of what’s referred to as “synthetic identity theft” fraudsters can use these new identities to attempt to open new bank accounts, apply for loans, buy goods, launder money, defraud users and more. Although victims are usually unable to immediately spot/block this kind of fraud, it still affects their credit rating causing significant distress.

Synthetic identity theft is the fastest-growing type of ID fraud around today, according to the FTC, which cited figures that it accounts for about 85% of the total identity fraud.1 Another research from Aite reported that synthetic identity fraud cost over $800m in credit card losses in 2017.2

Yet, as the banking sector evolves, so does fraud. The coming year will bring changes as Open Banking and PSD2 rules herald a new era of data sharing in the sector. Also, the Strong Customer Authentication (SCA) mandated by PSD2 could add major friction to the user experience unless firms choose fraud prevention solutions which can offer risk-based assessments on each transaction and powerful reporting capabilities.

Banks Need Dynamic Friction-Free Fraud Prevention

The problem facing many financial institutions is the age-old challenge of balancing usability with security. In a mobile-first, digitally powered world, accurate, real-time decisioning is essential. Introduce too many checks and the customer may give up. Too few, and you open the door to fraudsters. Along with the immediate impact on the bottom line of reimbursing consumers for fraud losses, financial institutions must also brace for customer churn as consumers may move to more trusted brands and/or ones which can offer more seamless services. Consequently, the financial and reputational impact on financial institutions could be severe. Financial industry needs a dynamic fraud prevention technology solution that not only spots this fraudulent activity, but also complies with evolving regulations.

The answer is advanced fraud prevention with adaptive decisioning that not only helps banks cope with the challenges while helping them stay ahead of the game. Simility, a PayPal service, offers a unique platform providing a 360-degree view of the end customer. It does this by pulling data in large volumes from a huge variety of data sources. We then apply machine learning to process this vast quantity of data, providing accurate results without stopping legitimate transactions or user requests. These smart machine learning models will also adapt over time as fraud evolves, empowering your human analysts.

The result: you could experience minimized fraud losses (including synthetic fraud), reduced operational overhead associated with manual reviews, and a great end-user experience to help drive a competitive advantage.

To learn more about Simility fraud solution, download Simility’s Adaptive Decisioning Platform whitepaper. 

1. FTC, The changing face of identity theft,
2. Aite, Synthetic identity fraud: the elephant in the room,
Rahul Pangam

Rahul Pangam

Rahul is the Co-Founder and CEO of Simility. Being a fraud detection industry veteran, he believes in combining the power of algorithms to recognize similar and dissimilar signals with the ability for humans to create meaning and giving front-line fraud fighters tools that empower them to put their domain expertise and knowledge to use without needing to write code.
Rahul Pangam