How Fraud Analytics Helps Combat Digital Fraud in Banking

Oct 15, 2019

Fraud Analytics

Digital or e-fraud has reached an alarming proportion in recent years, across the world. The growing popularity of e-commerce platforms rise in online transactions, an explosion of new payment channels and tech-savvy fraudsters have led to a rise in instances of data breaches and e-fraud. Today hackers are well-versed with many techniques that help tap into the online information of a user. Owing to such factors banking firms have been grappling with a variety of new-age e-frauds that have hindered their ability to expand their offerings. To tackle these challenges, they are now leveraging fraud analytics and advanced analytics methodologies to counter risks and data breaches.

Challenges Faced by Banks in Combating Fraud

The Emergence of New Channels and Services

The emergence of new offerings has paved the way for new payment channels. To stay at par with their peers most banking firms and other financial service providers including banks, alternative payments providers, and e-commerce companies have started launching new offerings at a heightened frequency. The evolution of offering within the banking sector has not only increased flexibility but has increased the fraud management challenges faced by banks.

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Ever-Increasing Number of Tech-Savvy Hackers

Hackers today are skilful and adept at outwitting the data security systems of banks. They leverage sophisticated software and data analysis techniques to perpetrate cross-channel frauds. Such advanced techniques have made it easier for them to mimic customer behavior and analyze online transactions at a deeper level. The advancements in technology have also made it possible for fraudsters to actively mine various social platforms. As such, they have been successful break into the data feeds of banks to build a piece of complete and accurate information on the identity of victims to perpetrate fraud.

Evolving Regulatory Landscape

Monitoring fraudulent activities and at the same time complying with the fast-evolving regulatory landscape is quite a challenge for most banking firms. Even if purely unintentional, such regulations often create more hurdles for fraud management. In most cases, such regulations require banks to reveal the data management approach adopted by them, which unintentionally reveals to fraudsters the confidential techniques of detecting frauds. Fraud analytics can help banks safeguard customer privacy by empowering them to automate the entire fraud tracking and monitoring process.

Some of the existing anti-fraud regulations inadvertently discourage fraud management collaboration between the ecosystem players which includes- banks, merchants, service providers, payment service providers, and so on. Instead, these regulations unintentionally force concerned entities to take a ‘pass-the-parcel’ approach – in which one entity legitimately ends up passing the fraud liability onto another.


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How Fraud Analytics Can Help Combat Fraud in the Banking Sector

By using sophisticated technologies and massive amounts of data sets, the baking industry is now focusing on fighting fraud in innovative ways. Fraud analytics has turned out to be the main aspect of the business agenda of every banking service provider. 

The data mining techniques and advanced machine learning algorithms that go into building robust fraud detection systems enable banks to instantly analyze data while continually training algorithms to improve their ability to identify and tackle fraudulent activities. Parallel analytics-driven efforts are also helping banks to build more reliable data management systems. The result is a more secure and trustworthy transaction experience for legitimate cardholders and end-users and more digital barriers to stop the hackers who try to exploit vulnerabilities in the payment platforms.

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