Financial fraud has gone mobile

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The world is seeing a double-digit growth of digital payments, but worryingly, the escalation of financial crime is not far behind, says Tarun Kumar Kalra, CredoLab’s senior vice president and head of global sales.

“Fraud is going mobile, mirroring consumer behaviour. We needed to better understand financial crime which is why we joined forces with iovation to produce the Financial Services Fraud and Consumer Trust Report 2019.”

Interviews were conducted with 5.9-billion financial services providers and 1,604 consumers in the US and the UK to produce the report, which revealed that between 2015 and 2018 there was a 575% increase in online identity fraud. As mobile quickly surpassed desktop during this period, nearly half of all these risky transactions stemmed from mobile devices. In the first half of 2019, 50% of all risky transactions originated from mobile devices.

“Through our interactions with financial services companies and other lenders in South Africa, we have quickly assessed that the problem here and in the African continent is as threatening as in other parts of the world. The South African Banking Risk Information Centre (Sabric) reported recently that the country currently has the third-highest number of cybercrime victims worldwide and loses an estimated R2.2bn a year to cyber-attacks," Kalra says.

“Tackling this issue is extremely complex. Overly aggressive fraud detection mechanisms can harm the customer experience by slowing transaction speed, requiring customers to perform too many steps before checkout, or worse, flagging good consumers as fraudsters or suspicious. After all, our business was established to bring more people into the mainstream economy through easier access to financial services and to credit.”

Sophisticated tools

Banks and financial service providers need to confront financial fraud with the same levels of sophistication as today’s criminals. They need fraud prevention tools that are real-time and accurate, and in 2020, Artificial intelligence (AI) and machine learning (ML) based solutions are central to achieving this.

“We have had to be infinitely smarter than hardened criminals while matching the rapid pace of digital change. AI and ML concepts are now familiar to most banks and financial institutions, but they need to go beyond traditional approaches to equal the rate and sophistication of financial crime. Conventional AI approaches that rely on rules and predictive models are no longer enough. Accurate information must be generated in milliseconds to combat the issue in real time.”

‍KPMG recently reported that fraud costs are increasing at a faster rate than fraud risk management spend, while the World Economic Forum’s Global Risks Report 2019, cites technological instability as a major risk with data fraud and theft now ranked the number-four global risk and cyber-attacks coming in at number five.