Fraud detection and prevention are critical to many businesses; however, they are of growing importance in the banking and finance sector, including card issuers, banks, credit unions, and lenders, according to a report from Juniper Research.
There are many anti-fraud measures that have evolved over time, the team at Juniper Research has explained.
However, Juniper Research pointed out that there “are constant developments within fraud rendering these methods void.”
Challenges must be tackled in the world of banking and finance “as new types of fraud, such as ‘silent fraud’, combined with cybersecurity vulnerabilities, are contributing to a mix of attack vectors.”
Juniper Research also mentioned that in banking, fraud detection “refers to the ability to monitor all transactions and payments in a way that helps banks accurately and quickly notice any suspicious activity worth reporting.”
Juniper Research defines issuer fraud prevention, also known as fraud detection and prevention in banking as: ‘Fraud detection and prevention in banking is the utilization of a number of fraud solutions and technologies, ranging from AML (Anti-money Laundering) to biometrics in order to help banks and other financial institutions to reduce the current fraud rates they are experiencing.’
Juniper Research also mentioned that fraudulent activities can encompass “a wide range of cases, including money laundering, cybersecurity threats, tax evasion, fraudulent insurance claims, identity theft, and terrorist financing, and is prevalent throughout the financial institutions, government, healthcare, public sector and insurance sectors.”
To combat this growing list of opportunities for fraudulent transactions, organizations are reportedly implementing “modern fraud detection and prevention technologies and risk management strategies, which combine Big Data sources with real-time monitoring and apply adaptive and predictive analytics techniques, such as ML (Machine Learning), to create a risk of fraud score.”
Juniper Research added in its extensive report that “detecting fraud with data analytics, fraud detection software and tools, a fraud detection and prevention program enables organizations to predict conventional fraud tactics, cross-reference data through automation, manually and continually monitor transactions and crimes in real time, and decipher new and sophisticated schemes.”
The report pointed out that the number of fraudulent banking and money transfer transactions in the UK is anticipated to “increase 111% over the next five years.”
Growing from 4.2 million “in 2024 to 8.8 million in 2029.”
Despite the UK being one of the most tech-developed FDP (fraud detection and prevention) markets, it is “anticipated that additional measures, such as AI-based real-time FDP, will be required to mitigate the growing threat of fraud.”
The UK’s upcoming PSR reimbursement regulation will “significantly impact fintechs’ adoption of FDP solutions.
Regulation aims “to reduce fast-growing APP fraud, the act of fraudsters tricking their victims into willingly making large bank transfers.”
However, Juniper Research explained that “there are increasing concerns surrounding the regulation’s impact on faster payments, potentially slowing them to ensure that the APPs are legitimate.”
Therefore, AI needs to be “implemented into FDP systems to enable financial institutions to quickly identify APP fraud without diminishing the value of faster payments.”
Expectations are for better methods to be implemented, including biometrics and behavioral tools.
