FICO World 2023 - Agenda Focuses on 3 Key Fraud Strategies

FICO’s annual conference is the place to learn more about making decisions at scale – not least for those fighting fraud

The fraud challenges facing organizations today are far beyond what could have been predicted pre-Covid and the stakes have never been higher. Operating at highly organized and relentless levels, fraud networks have become a multibillion-dollar, global problem.

The banking and financial services industry must evolve their fraud-fighting strategies at an equally relentless pace to stay one step ahead.

At this year’s FICO World 23, our annual global forum which attracts over 1,000 people, global thought leaders will share the latest and most effective strategies to fight the most pressing fraud challenges that we have seen. There are three key themes that our work over the past year has shown are top of mind for those engaged in fraud protection.

Scams and real-time payments

In recent years, scams (or authorized push payment fraud) have given fraudsters a golden opportunity. The ongoing economic uncertainties have only added to the problem as more people become more susceptible to scammers and their social engineering techniques. Millions have been tricked into authorizing payments into bank accounts that fraudsters control. Last year in the UK, nearly 41% of fraud losses were due to scams. In the US last year, consumers lost at least $8.8 billion in scams, a 30% increase in fraudulent activity over 2021.

Millions of individuals have been left vulnerable, and most (two of out three customers) expect banks to refund victims. The reputation of lenders is being eroded and the issue is attracting scrutiny from regulators. Scams have become a scourge on the industry, as banking and financial services organizations find it almost impossible to prevent this kind of fraud from taking place. But it can be done — through a layered approach using artificial intelligence and machine learning.

There are still many countries in the process of adopting new real-time payment systems and trying to deal with the impact of fraudsters and money-launderers who can move money instantly. There is much that can be learned from the experiences of those countries that now have established real-time payments schemes, and it is a topic that will be explored by one of the fraud panels taking place at FICO World. Thought leaders including Julie Conroy from Aite Novarica, Jonathan Williams from the UK Payment Systems Regulator and Mary-Helen McElfresh from Early Warning Systems will offer insight into how real-time payments have progressed across the globe and what the regulatory and liability landscape looks like in established, emerging, and potential markets.

The UK is one example of an early adopter of real-time payments (2008). Jonathan Williams from the UK Payment Systems Regulator will be giving an overview of the UK's experience, how it is tackling financial crime and achieving true innovation, and what emerging and potential markets can take away from the UK’s experience.

Fortunately managing APP fraud is an area of expertise for FICO. James Roche will present how using a combination of AI and machine learning and innovative customer communications, detection and prevention can both be enhanced.

Hyper-personalization and communications that drive action

77% of customers worldwide want their banks to offer better fraud detection. Unfortunately, there is a fundamental tension between this desire and the desire for a positive customer experience. The tighter the controls are, the more friction customers will experience. And while consumers do not want measures to be ‘loosened’, a negative experience, e.g., access to accounts or purchases being delayed or prevented, has negative consequences.

There is growing recognition that fraud decisions need to be personalized to the individual customer and their specific situation to achieve a balance.

And this awareness has introduced the concept of “hyper-personalization”. It is a “supercharged” version of personalization, light years ahead of standard segmentation, or even micro-targeting. It’s where highly unique and personal experiences are provided at every single touchpoint in a customer journey. It leverages data, advanced analytics, artificial intelligence and automation in order to anticipate the specific needs, wants and preferences of individual customers.

Until recently, it was the golden key of ecommerce giants like Amazon and Netflix, but every industry is now talking about it and it has made its way into the boardrooms of banking and financial service organizations. More than half of all decision-makers in this sector readily admit that hyper-personalization is the critical route to driving improved customer engagement, loyalty and reputation. Within the next 12 months, the vast majority of banks (88%) will significantly step-up their hyper-personalization programs through the deployment of analytics and machine learning to gather insights.

In the context of detecting fraud, hyper-personalization places the customer at the heart of each fraud decision and pulls them in to play a more integral role in preventing fraud. Combined with two-layered, interactive customer communications at the point of transaction and done at scale, it is set to be a game changer for the industry.

This approach significantly reduces the chances of communication being ignored when a transaction falls outside of the ‘normal’. For example, Confirmation of Payee (CoP) was introduced to help prevent some scams, but it is being ignored by millions who see the warnings from the banks when account don’t match as generic messages and simply click through.

Instead, the new approach asks customers about the transactions they wish to make in real time, with details pertinent to the specific transaction and using the customer’s channel, or channels, of choice. Providing them with friendly advice and asking relevant questions can help them think again.

This is one of the key strategies being explored by a panel of experts, whose innovative approaches using multiple channels and two-way communications have ensured that customers are empowered to play a more effective role in the fight against fraud.

What does the future of fighting fraud look like?

With fraudsters continually evolving their strategies and innovating with machine learning advancements, we are in a crucial arms race against them.

The banking and financial services sector must keep a finger on the pulse to ensure they have an understanding of what is to come, both from the fraudsters and from the industry itself. For example, what fraud types will grow? What new fraud types are likely to emerge? What innovations are on the horizon to help conquer them?

At FICO World, fraud experts will talk about the vital role artificial intelligence and machine learning plays and will continue playing in detecting fraud. FICO’s award-winning behavioral analytics technology, for example, is proving to be a powerful weapon in the war against scams. The technology is ahead of its time. It monitors and identifies the normal behavior of each individual based on their personalized transactions, then identifies behaviors outside of these normal patterns. It continually adjusts, adapts, reassesses and refines what is deemed normal behavior for any given time period, enabling a better understanding of when fraud is happening.

Fraud experts will also consider where artificial intelligence and machine learning is going, and how the technology organizations implement now will help tackle future fraud challenges as the landscape evolves. Looking as far ahead as 2030. Julie Conroy from Aite Novarica will provide a fascinating view on what she believes fraud fighters are likely to face once we enter the next decade, and beyond. What fraud typologies are likely to disappear, and as open banking moves into open finance and then open ecosystems what new threats will emerge? How prevalent will relatively new technologies, like quantum computing, become and will “deep fakes” make biometric authentication redundant? Will organizations finally achieve true enterprise fraud management by 2030 and will this result in advancements on the sharing of fraud intelligence data?

The future of fraud detection and prevention is a proactive, customer-centric, integrated, and continuously evolving approach that relies on artificial intelligence and machine learning, and employs actionable analytics. Conferences like FICO World continue to play a vital role in enabling organizations to remain connected to the latest developments and most effective approaches.

How FICO Can Help You Advance Your Fraud-Fighting Strategies

 

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