For a while now, folks at FICO have been talking about the convergence of fraud- and financial crime-fighting data, processes and systems. And with good reason—all signs indicate this direction to be the most efficient for banks, the most beneficial for customers, and the most aligned with regulation. In this blog I’ll reprise the product strategy version of the convergence story, which I recently presented at FICO World 2019, introduced as “brought to you by the letter ‘C,’ as in ‘convergence.’” (I could see the Cookie Monster fans smiling in the audience.)
Convergence Is Complex
The smartphone provides a good analog of the multi-faceted convergence of fraud and financial crime domains. At a glance, the smartphone seems like a simple, yet brilliant combination of phone and computer. But it’s actually much more than that. In addition to obsolescing things like paper calendars, alarm clocks and flashlights, mobile apps have become the preferred way for people to communicate, socialize, handle their finances, monitor their health and much, much more.
Bringing the smartphone analogy back to banks, convergence is a journey that brings together not just fraud and compliance organizations, processes and systems — it’s changing the way banks think about how they treat customers and deliver financial services. In an environment filled with new ways to spend and transact money, fraud and compliance functions are no longer silos; marketing, customer experience and digital teams are now converging to influence fraud- and financial crime-fighting strategies, too.
A Co-Ordinated Perspective of Risk
Against a backdrop of constant change and high expectations, FICO looks to provide solutions and technology that give financial organizations a coordinated perspective of risk. At the 39,000-foot level it starts with capabilities that answer three simple questions ...
- What are the money inflows?
- What are the outflows?
- What are all the things that people are doing with the money along the way?
…. across all manner of transactions (debit card, ApplePay, Venmo, Zelle, ad infinitum) and channels (branch, browser, mobile app, interactive voice response [IVR], call center). Finally, there is layer of authentication at every step of the way, even if it’s not visible to the user.
All of these shifting variables need to be continuously calibrated and synchronized to develop a coordinated perspective of risk.
Building Out a Framework
FICO has been working for a number of years to build out the framework for the solutions, technology and analytics to deliver on this vision. In 2015 we invested in the acquisition of TONBELLER and its portfolio of compliance solutions, fully integrating them with the FICO® Falcon® Platform.
In November 2019 we announced FICO’s acquisition of EZMCOM and its authentication capabilities; these form the foundation of FICO® Identity Proofing and the FICO® Authentication Suite, adding three types of capabilities to our solution portfolio: multi-factor authentication, biometric-type authentication and behavioral authentication, the latter of which assesses the way a user interacts with their phone, presenting the next frontier in this area.
We’ve also found new ways to leverage the anonymized transaction data that 9,000 institutions contribute to the FICO® Falcon® Intelligence Network. Most recently we launched FICO® Card Compromise Manager, which analyzes transaction data on a global basis, in the cloud, to identify compromises. Notably, this solution also provides actionable recommendations on how issuers can respond: should cards be blocked, reissued or monitored? We’ve built the ability to integrate Card Compromise Manager with all of your Falcon defenses to — again — give you a coordinated perspective of risk.
FICO’s 'X-Generation' Platform
Clearly, coping with fraud and financial crime in an evolving, increasingly real-time payment environment requires a flexible platform that also allows you to manage ongoing know your customer (KYC) activities, sanction screening and money laundering monitoring, as well as ever-shifting device profiles. This broad range of functionality needs to be in a single place to order to inform an intelligent fraud strategy.
That’s what FICO® Falcon® X is all about. It’s our next-generation financial crime platform built for the cloud. It provides the single source for a centralized fraud and financial crime strategy, and a coordinated perspective of risk. Launched in fall 2019, Falcon X delivers capabilities in four key areas:
- Radical flexibility with the ability to rapidly design, simulate and modify detection strategies, with limitless data possibilities.
- Unified operations with a single, cloud-based technology stack, for more efficient workflows across fraud and compliance.
- Agile machine learning with InstantML and the Financial Crimes Studio. We provide a complete modeling framework to wrangle data, understand it, test and challenge different models and techniques. The Financial Crimes Studio brings these capabilities together, with InstantML that lets you not just leverage open source technology to build models, but FICO technology as well. FICO has built analytic models for years, and now we’re now putting them in the hands of your data science team to use in conjunction with their own algorithms.
- X-dimensional profiling, which takes profiling down to a nano level. You can see how an individual interacts with different call centers, uses different devices, determine if others are using the same computer or device, and much more.
As you can see, the convergence of fraud and compliance is more than a combination of two traditional functions. It’s a transformation that can give you a coordinated perspective of risk, and an unparalleled foundation from which to deliver outstanding customer experiences.
Follow me on Twitter @FraudBird.