We all saw how drastically financial behavior changed during 2020.
It’s not surprising so many people moved online, given the significant challenges associated with traditional lobby-based transactions. The more startling and unsettling thing is how financial fraud has also morphed and changed. Even while this criminal evolution happens, though, there are still elements common to all types of fraud.
- Truth #1: Fraud grows faster than you may realize
- Truth #2: You will need to do more to fight fraud, do it better, and do it faster
- Truth #3: Your legacy systems are poorly prepared for what’s on the way
- Truth #4: A comprehensive approach is the best approach to the threat of fraud
- Truth #5: Your fraud defense should handle multiple data sources
- Truth #6: The ideal solution should be flexible enough to adapt to change as needed
- A successful overall fraud solution: MemberPass
- Schedule a demo
Bonifii’s security partner, Equifax, recently published a report with information about six factors they consider to be fundamental truths about fraud. This article is a summary of what they found.
Truth #1: Fraud grows faster than you may realize
And it’ll continue to do so. Fraud is a big problem for financial institutions. And it grows in spite of the billions spent on fraud prevention. According to a 2018 analyst report from the consultant group Aite, the aggregate incidence of new account fraud, account takeovers, and fake ID fraud increases at an annual rate of 100% or more.
This is due to a number of factors.
- More financial behavior of all types takes place online and it will continue to rise.
- New types of transactions and new financial technologies create new vulnerabilities and exposures.
- Cyberattacks are on the rise from sources that originate outside the US.
- Malicious use of advances in AI and machine learning is rapidly increasing.
In addition, there’s a more fundamental reason why fraud will continue to grow. The people who know how to do it, and are skilled at it, can make money – a lot of it. As long as they have the knowledge and ability to con people out of their money, they will.
Truth #2: You will need to do more to fight fraud, do it better, and do it faster
You may feel as if you’re being asked to deliver what seem like contradictory outcomes.
On one hand, you’re supposed to put resources toward continually improving your CU’s overall member experience. But you’re also supposed to spend money to implement more effective fraud-prevention measures.
Or perhaps you have a goal to maximize transaction efficiency and minimize transaction friction. But what if you’ve also been told you need to increase your account acceptance rates and reduce authentication errors. It’s tough to do both at the same time.
And, when you’re already overwhelmed by data sources and one-off solutions, conflicting goals like these can seem almost impossible to accomplish. For example, existing fraud prevention systems can’t simultaneously improve the member experience without also increasing the risk of fraud and authentication failures.
To make matters worse, it’s hard for you to know where to put your emphasis first. According to a 2018 Forrester report, the areas where financial institutions perceived the greatest fraud risk were split fairly evenly across:
- New account opening
- Payment systems
- Fraudulent account takeover
The trick is to adopt a solution to simultaneously improve the member experience, reduce transaction friction, respond actively to today’s fraud threats, and anticipate tomorrow’s emerging threats.
Truth #3: Your legacy systems are poorly prepared for what’s on the way.
As we’ve noted, fraud techniques continually change, evolve, and adapt. Fraudsters learn on the job and use advanced technology to identify new vulnerabilities they can exploit. Your legacy systems weren’t even designed for what they face today, much less the new stuff they’ll have to face tomorrow.
Traditional rules-based anti-fraud systems and manual processes suffer from two general weaknesses.
- Manual detection systems slow down when there’s a rapid rise in the number of transactions.
- Rules-based systems can be cracked.
In any case, once fraudsters understand a rules-based system, they’re already at work to find the vulnerabilities. Their constant goal is to uncover new opportunities to con more people out of their money.
Truth #4: A comprehensive approach is the best approach to the threat of fraud
First, you need to be able to combat the threats across account opening, account access and management, and transactions of all types. Second, your fraud defense must comfortably accommodate structured data, unstructured data, machine learning, and cloud-based solutions.
Truth #5: Your fraud defense should handle multiple data sources.
It’s because you’ll need to have enough information to keep up with increasingly more persistent and complex fraud threats. The best data solutions will be able to deliver a useful and comprehensive view of device users and their transactions.
The strong fraud-defense solutions will be able to handle:
- Basic data analytics
- Advanced analytics, predictive analytics, and adaptive decisioning
- Third-party device data, behavioral data, and transaction data.
- Cloud-based data services for speed, flexibility, and agility.
Truth #6: The ideal solution should be flexible enough to adapt to change as needed.
The ideal fraud solution should:
- Be efficient.
- Be able to identify and evaluate fraud risk almost in real time.
- Improve the member experience
- Reduce transaction friction.
- Be able to anticipate new threats before they impact you.
Your first step in a successful overall fraud solution is easy: start with MemberPass.
This is because absolutely every time you authenticate someone, regardless of the transaction type, access channel, or purpose, there’s risk. In other words, when fraud occurs, it always starts with an authentication failure.
MemberPass creates a different reality. When members ID themselves with MemberPass, you can be certain they are who they say they are. With MemberPass in place, all forms of financial fraud are virtually eliminated.
If you haven’t already added MemberPass, we’d be happy to arrange a personal demo
After all, seeing is believing. You can email us to set up your own demo. You can also register to attend a MemberPass webinar or visit us online at www.memberpass.com to find out more.
You should make the fraud-fighting power, security, and convenience of MemberPass digital ID part of every member’s financial profile. The sooner you adopt the program, the sooner your members will enjoy the digital ID benefits!
Bonifii, a credit union service organization, offers MemberPass, a simple, secure, and convenient form of member identity verification. MemberPass digital ID provides access to financial accounts while the members keep control of their private personal information. We leverage touchless technology to protect you and your members. Visit www.memberpass.com or email firstname.lastname@example.org