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Maintaining the balance: Protecting customers from account takeover while providing a great experience

Mannie Da Silva, Global Product Line manager, Financial Crime Risk Management Solutions, Fiserv | Aug. 26, 2015
To do so, banks will need to invest more heavily in security and streamline their anti-fraud operation, says Mannie Da Silva of Fiserv

This vendor-written piece has been edited by Executive Networks Media to eliminate product promotion, but readers should note it will likely favour the submitter's approach.

With the rapid advancement in mobile technology, combined with increasing threats to personal and financial data, the evolving nature of fraud has become a top concern for most financial institutions (FIs) across Asia. According to the Association of Certified Fraud Examiners, on average, five percent of all transactions in Asia are fraudulent. This rate is even higher in emerging markets such as Bangladesh, Vietnam and India. Major cases include credit card fraud, identity theft and shipping fraud.1

In the region, it has become extremely challenging for FIs to tackle threats from increasingly creative and resourceful fraudsters. Criminals use increasingly novel schemes to take advantage of new payment channels. FIs in the region must understand these emerging security threats and adapt their financial crime risk management strategies accordingly to protect their customers' financial assets.

Despite this ever-present threat, many financial institutions across the region deploy anti-fraud tools that are not sophisticated enough to provide a full view of customer behaviour across all products and channels. They often also do not include non-financial transactions, such as address changes and cheque requests that are often early indicators of risk. As a result, these tools are unable to detect account takeover early enough to prevent a loss. However, taking a draconian approach to fraud prevention to avert account fraud might well have a negative effect as well.  Preventative actions taken when there is a lack of understanding of customer's personal banking behaviour will likely result in them being routinely inconvenienced.

Therefore, it is paramount for financial institutions to strike a balance between protecting customers at risk and providing an excellent service experience. In order to move forward, financial institutions in Asia need to identify the key challenges that they face in effectively recognising the earliest signs of fraudulent transactions. They then need to streamline their systems and processes to act quickly and efficiently to stop criminal activity -- while still optimising daily customer service that is non- disruptive to their clients.

Managing false positives
One of the challenges FIs find themselves up against on a daily basis is the struggle to deal with false positives. A false positive is when a fraud alert is generated for a transaction that is in fact legitimate. This happens when fraud and risk systems don't provide the ability to accurately profile customer behaviour and merely look at questionable transactions or requests in silos.

For example, when a withdrawal is flagged as a fraud risk because the amount is over S$10,000, it can be difficult using a rules-based fraud prevention system to identify whether this would be classified as 'normal' or 'suspicious' activity for an individual customer. A deposit of S$10,000 may be common for one individual, but may be particularly unusual or indicative of possible account takeover when accompanied with a recent address change. Customers who need to wait days for transactions to clear will inevitably become dissatisfied and could potentially look to bank with alternative providers. Delay in clearing legitimate transactions can also cause regulatory compliance issues. The deposit or transaction amounts that are considered 'usual' or 'suspicions' also varies tremendously  across  Asia.  The  frequency  of  false  positives  can  become  a  significant  resource burden.


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