When individuals become victims of fraud, they point the finger at their financial institutions.
FREMONT, CA: Financial institution executives anticipated a slight decline in fraud in 2020, but as COVID spread worldwide, executives quickly realized that fraud would increase significantly. At the moment, attack rates are growing, attack surfaces are growing, and attacks are wreaking havoc on banks. Financial institutions must be prepared to address the following fraud prevention challenges in digital banking to protect themselves.
Fraud Prevention
The primary goal of fraud detection and prevention is to reduce fraud. Financial institutions must be prepared to detect fraud across all digital banking channels, including fraud involving new accounts and account takeovers. Financial institutions require comprehensive anti-fraud solutions to combat the growing volume and complexity of attacks while also identifying and responding to novel attack scenarios.
Customer Experience Enhancement
Simultaneously, financial institutions must address fraud prevention without impairing customers' ability to access their accounts and conduct transactions. Historically, the gold standard in fraud prevention was rules-based systems. However, this old-fashioned approach introduces friction into the customer experience because rules-based tools frequently misclassify legitimate transactions as fraudulent.
To optimize the customer experience while maintaining a secure environment, financial institutions must abandon rule-based fraud detection systems in favor of real-time fraud analysis powered by analytics. They require tools capable of making instant decisions based on examining multiple elements of each transaction and their context with previous actions.
Establishing Trust
Customer trust is a bank's most valuable asset. One cannot have a business without customers. He will lose his customers' trust if his financial institution is victim of a large-scale attack or if individual customers fall victim to fraud.
Costs Associated with Fraud
To safeguard the profit margins, one must minimize fraud-related costs, which include the following:
- Keeping an internal fraud team afloat
- Enhancing the anti-fraud technological stack
- Paying penalties for non-compliance
- Customer loss as a result of a poor user experience
- Suffering additional indirect costs as a result of reputational harm
Deficiencies in one’s fraud technology stack can result in increased fraud or a disjointed customer experience. To establish trust, he must strike a balance between these two components.
Compliance with Regulatory Requirements
Every year, the regulatory environment appears to become more complex, and financial institutions that operate on a global scale must have anti-fraud solutions that comply with the diverse regulatory requirements of multiple countries. To comply with regulatory requirements, one needs anti-fraud solutions that are constantly updated in response to new regulations.
Addressing Fraud Protection Gaps
Numerous fraud detection and prevention tools are available on the market, but none of them compare in terms of quality, sophistication, or efficacy. Financial institutions must ensure that their anti-fraud solutions incorporate new security features such as mobile application security, device intelligence, and session monitoring.
Practical tools should also manage large volumes of data associated with apps, devices, users, accounts, and channels. Numerous financial institutions have gaps in their anti-fraud strategy due to their use of disparate fraud technologies that were not designed to work in concert. To avoid as many gaps as possible, they should connect risk capabilities and share data across all financial institutions' business lines and functions.
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