Fighting fraud and financial crime with a single customer view

The number of companies reporting fraudulent occurrences has surged once again – this time, from 36% of banks in 2016 to an astounding 49% in 2018. This massive increase in fraudulent activity has occurred in parallel with digital transformation efforts from companies globally. Fraud and financial crime have evolved to a new level of complexity, exploiting weaknesses that these new channels have. The insights around the exploitation of these new channels also speak to the immediacy of the global fraud and financial crime issue: in 2017, there were 380,000 mobile account takeover (ATO) occurrences, however, as companies continue to shift a large portion of their business to online and mobile channels, this number has skyrocketed to an all-time high of 679,000 occurrences in 2018.

These challenges are also compounded by the growth in purchase transactions, which is expected to explode from their last measurement in 2015 of USD 258 billion to USD 767 billion by 2026 – an increase of roughly 297% in just 11 years. The combination of this growth paired with the high fraudulent occurrences paints a worrying picture. All companies within the payment ecosystem – global banks, challenger banks, ecommerce marketplaces, big and small merchants – will all feel the heat of this massive surge in financial crime activity.

One big question arising from these major problems is this: with financial crime schemes already so advanced and so adept at exploiting weaknesses in not just a singular channel, but across multiple channels simultaneously, how do organisations best protect themselves from financial crime and fraud?

First, it’s important to acknowledge how advanced financial crime and fraud has become. Take, for example, a multichannel ATO fraud scheme used by criminals at banks:

fraudster gains visibility into credit card number, account user details, and phone number from a data breach;

fraudster commits a SIM swap (tricking a phone company to change the SIM on an account to the one fraudster has in their possession) to take over the individual’s phone and intercept incoming messages;

fraudster calls the bank on the new phone number and, after researching the individual online, answers the basic verification questions and asks to reset the password;

the bank sends a text message with a security code to the number on file, that the fraudster receives immediately;

fraudster logs into the account on their computer and drains the account.

In just a few hours, a fraudster can completely drain an account, forcing the bank to repay the customer and rebuild the broken customer relationship.

The problem with the majority of fraud and financial crime prevention platforms is that they are not properly equipped to detect this type of behaviour. Often, customer behaviour is siloed and only specific to a single channel, enabling criminals to avoid detection methods by exploiting gaps that exist between channels.

Banks need to be able to build a single view of the customer across all channels

In order to meet this need, the requirement for a fraud or financial crime platform is simple, but the execution is not. The platform needs to be capable of scoring behaviour with hypergranular accuracy across all channels in real time. Profiles that are created in one channel shouldn’t be ‘recreated’ in another channel. Rather, profiles should be able to add risk information as a customer interacts with a bank, regardless of the channel the customer chooses.

This enables companies to build a 360-degree view of each customer within their system. That way, not only are anomalies clearly seen, but banks are able to mitigate even the most elaborate fraud and financial crime attempts across both new and old channels.

To build an even more accurate customer profile, companies need to also think beyond cross-organisation for data collection. Data consortia enable enrichment from outside of a company, allowing companies to assess risk and behaviour more accurately, even if they’ve never seen the customer before.

Leveraging Feedzai for a 360-degree customer view

Feedzai’s platform is built from the ground up as an omnichannel fraud and financial crime mitigation platform. We leverage hypergranular Segment-of-One profiling to hyper-analyse individual entities, and then collect data across all channels to accurately provide a 360-degree risk and customer behaviour assessment.

Feedzai’s clients also use Risk Ledger, our proprietary risk-focused data consortium, to bring insights from all across the payment ecosystem and significantly bolster scoring accuracy. For that reason, Risk Ledger enables companies to acquire more customers — even those with thin files or who are underbanked — with confidence.

This editorial was first published in the B2B Payments and Fintech Guide 2019, which offers insights and analyses from thought leaders on key industry topics such as cross-border payments, instant payments, B2B commerce, payments infrastructure, and many more.

About Martin ten Houten

Martin ten Houten has more than 25 years of experience in both fintech and technology industries with roles at Visa, Pindrop, NetApp, PTC, and others. Martin joined Feedzai in 2018, serves as VP EMEA, and has helped to ramp up the company’s expansion throughout EMEA.

About Feedzai

Feedzai is the market leader in fighting fraud with AI. We’re coding the future of commerce with today’s
most advanced risk management platform powered by big data and machine learning. Founded and developed by data scientists and aerospace engineers, Feedzai has one mission: to make banking and commerce safe. The world’s largest banks, processors, and retailers use Feedzai’s fraud prevention and anti-money laundering products to manage risk, while improving customer experience.