The Human Element of Risk: Why Collaboration Is the Key to Stopping Fraud

As we slowly move back into a sense of normality, we are hearing “sorry, I was on mute” a little less, and “so good to see you,” a little more. Despite this, fraudsters have seen the pandemic as an opportunity to find new ways of scamming consumers and businesses, as we have found new ways to pay. It is important to reflect on how far we have come, but also how far we have left in the fight against fraud.

As with many changes that will likely remain post-pandemic, the adoption of digital payments continues to skyrocket, and so too have new fraud methods. To fight COVID-19, countries across the globe collaborated against the virus – an example we should follow when fighting fraud.

Looking out for APP fraud

For the first time in the U.K., card fraud was not the top cause for loss to financial crime during the first half of 2021. It has been surpassed by APP fraud, which has increased by 71%. Authenticated Push Payment fraud scams convince a consumer to authenticate an illegitimate payment. There have been significant increases in impersonation scams, purchase scams and investment scams. The pace of change has been extraordinary. Overnight, we all began working and playing from home, creating more digital transactions and making online orders, opening ourselves up to more cyber risks. The pandemic created a new opportunity for fraudsters to offer us tax refunds in a time of economic strain, pose as a romantic interest in need of funds during a time of loneliness and take advantage of the new realities of our lives. U.K. Finance has warned that this is now a national security issue – although the U.K. is an island, no one British entity or company can resolve this problem alone. The issue does not start and end on the British Isles. The FBI reported a 400% rise in cybercrime complaints as a result of the pandemic and APP fraud is rising across the globe.

Stopping scams – what is the missing link?

Looking at the recently published figures, the problem does not lie with security, but with deception. It is clear that banks understand the risks around deception, as they look to control this through operational risk management. However, what banks are struggling to understand is the human element to fraud risk management. Fraud prevention is only as strong as the weakest link. In this case, it is almost always the person involved – whether that is the account owner being fooled into transferring their life savings to an illegitimate investment, or an administrator falling for CEO fraud.

Banks have to contend not only with the exponential rate of change in the payments world, but also with increasing consumer expectations. Consumers expect their money to be protected at all costs, at no expense to their ability to move money. Before we know it, there will be a spectrum of payment methods on the market that we haven’t even dreamed of. Fighting fraud has always been a game of cat and mouse, and the question is, will fraudsters find a way to exploit future changes before the industry finds a way to prevent them?

The three-pronged approach to fighting scams

The U.K. fraud figures are just a snapshot of the industry, but it’s a consistent and reliable barometer. It is time we all join to better manage the convenience afforded to consumers to make payments in real time with fraud prevention and education. Since the introduction of automation in payments, and the removal of risk officers’ control over transactions, consumers have more financial freedom to move money instantly. This is the human element. To maintain this freedom, in which consumers are in control, there has to be education at the blunt end, punishment at the business end and collaborative expertise at the sharp end.

To enhance this collaborative expertise, ACI now offers a new proprietary technology known as network intelligence. Network intelligence allows financial institutions to securely share and consume industry-wide fraud signals to optimize machine learning models. This brings unprecedented cross-industry collaboration to the fight against fraud, optimizing machine learning models for today’s real-time world. This new capability was recently awarded “Best WOW Insight from Data” from Fintech Finance, and is primed to defeat more APP and real-time payment scams.  

Download this new eBook to see how network intelligence, ACI’s award-winning proprietary technology, is bringing next-generation intelligence to machine learning models. Plus, read more about ACI’s recent awards, including our Best WOW Insight from Data Award.