Fraud Protection & Compliance
In May, 800 FICO customers and partners joined FICO colleagues at the first FICO World since the pre-pandemic event in New York in 2019. In an event that included exclusive access to Universal Studios’ Wizarding World of Harry Potter and Jurassic Park areas, AND a party in the Hard Rock Café, we still managed to find time to explore the hottest issues and trends in fraud protection. Five fraud trends for 2022 kept cropping up and seemed to be of the most interest to our anti-fraud delegates.
1. Synthetic Identities and Application Fraud
Despite the launch of industry initiatives in the USA such as the Electronic Consent Based Verification Service (eCBSV), it seems that this problem has not diminished. Many delegates were concerned that the acceleration of digital transformation created by the pandemic has made application fraud at scale even more attractive.
Criminals are playing a numbers game to see how many accounts they can open. For that they need two things – automation and an unlimited supply of fake consumer identities. We’ll come to the automation later, but the creation of synthetic identities allows for almost unlimited variations by subtly altering a name or address or other attribute many, many times.
FICO colleagues Andy Procter and Supriti Singh were on hand with their presentation Application Fraud – Rules, Models and Humans. They helped delegates understand how FICO’s social network analytics can be deployed to find the hidden links between entities, visualize the networks of criminal behavior and facilitate the prioritization and investigation of cases.
2. The Rise of the Bots
As mentioned above, criminals are making use of automation in order to industrialize their fraudulent attacks. This is not only the case for application fraud — where automation is used to create and submit hundreds if not thousands of applications — but also for card fraud. We heard how some customers had found that bots were being used to gain data, for example attempts to make a payment to a charity website were in fact criminals testing card details to uncover the right 3 digits for the CVV.
One of our customers told how they had been able to deploy user defined variables in FICO Falcon Fraud Manager in order to track and understand payment velocities. They were able to identify attempts to uncover CVVs on the cards they had issued and could therefore have those cards blocked and reissued.
3. Innovative Customer Communications for Fraud
Detecting possible fraud is important, but what you do with that suspicion may matter even more. Taking the most strident fraud prevention actions might seem the intuitive answer but suspicion is often unfounded, and most customers are not fraudsters. Removing friction from legitimate customer interactions and getting disputed transactions back on track is important and this is where customer communications that are integrated with fraud detection come to the fore.
One US customer spoke about the importance of customer communications that were two-way and built into a fraud workflow to automate more of the process and bring cases to a fast resolution - particularly for legitimate customers. We also heard from two Brazilian financial institutions about how they were leading the way in deploying WhatsApp as an integrated channel for customer communications and were seeing customer response rates of over 70%. For them, this meant that they could rapidly close fraud cases over two-thirds of the time and so reduce operational costs and customer frustration.
4. It Isn’t Just a Pandemic – There’s Also a Scamdemic!
At the last FICO World in 2019, a speaker from a UK bank talked about the increase of scams that were impacting them and their customers. It was a very popular session, but it seemed not many delegates had the degree of exposure to scams that some of the UK banks had experienced. This time it was different! Many delegates used the term ‘scamdemic’ when speaking about the many ways in which their customers were being tricked.
We heard about taxi and fast-food scams where customers were distracted as large sums were being entered into card machines prior to PIN entry, as well as many variations on authorized push payment fraud. Scams that took place in the online environment were particularly prevalent, with people particularly at risk when they pushed to use digital channels that they weren’t used to. This was coupled with the rise in real-time payments that has occurred in the past few years with the fast transfer of funds helping criminals to take the money and run.
Although many delegates talked about victims that weren’t digital natives, it was clear that fraudsters became even more inventive during the pandemic. There were tales of scams that caught out the young and digital-savvy, such as crypto investment scams and romance scams – anyone can become the victim of a scam.
FICO Colleague Tanya Baker was on hand with her presentation Fraud Analytics Innovation – Sophisticated Tools for Challenging Times to talk customers through FICO’s analytical innovations that tackle scams, including the FICO machine learning model for scam detection.
5. Convergence – Beyond Fraud and Financial Crime Compliance
Another hot topic in the past few years has been the convergence of fraud and financial crime departments. It continued to be a topic of debate at this FICO World, but the approach has become more nuanced. It was clear that our customers had spent much time considering when it was appropriate to bring the two functions closer together and when the unique objectives and expertise of each need to flourish. Key to this discussion was the use of data across both functions the topic for the presentation by Aite’s Julie Conroy and FICO’s TJ Horan.
The convergence debate was reflected in conversations about FICO Platform, where the idea of single solutions for single use cases has been consigned to history. FICO World bought together people from multiple functions in a spirit of collaboration, ready to uncover how they could use a single set of capabilities to answer any question they had about a customer and manage any process.
Digital transformation and customer-centricity have been industry buzzwords for years, but convergence is where the rubber hits the road! Closer working and shared capabilities were covered in a number of ways:
- Managing identity authentication – there are many point solutions but using a single platform to orchestrate how they are used was the subject of discussion of my presentation with Mark Crichton from Outseer.
- Customer lifecycle management – our Digital Jane videos illustrated how joined-up thinking and execution enables real-world digital transformation across multiple channels and customer touchpoints.
- Credit risk and fraud risk – when you’re onboarding customers, why have two siloed solutions and two processes when unification eliminates contradictory outcomes and enhances customer experience?
Join Us in Hollywood (Florida)
FICO World 22 may be over, but we have FICO World 23 to look forward to! If you loved FICO World 22 or if you missed out, now’s the time to bag a bargain with an early bird discount.
Learn More About Fraud Trends for 2022 and FICO World
- See highlights from FICO World 2022
- Access and download FICO World 2022 presentations
- Meet Digital Jane and see how innovative financial institutions are successfully executing their digital transformation by delivering next generation customer centric interactions powered by FICO Platform.
- Find out more about FICO World 2023