AI is in a stage of significant acceleration within multiple industries, but is it being leveraged to full effect by financial companies looking to manage the implications of fraudulent activities?
Why is protection against fraud a growing concern for banks? Fraudsters continue accelerating their cyber activities, incorporating innovative and sophisticated plans to disrupt businesses each year. A 2023 report from FTC highlighted that customers in the UK lost over $300 million due to fraudulent texts last year, rising considerably from $131 in the previous year. The report also discovered that the most common finance scam was duplicated bank fraud, where a scam impersonates a reputable organisation via texts, requesting a significant purchase.
The financial industry must adopt artificial intelligence (AI) to tackle these issues, which detects fraudulent activities quicker than humans while strengthening communication efforts to tackle these scamming tactics and build customer protection.
How can the finance industry implement fraud detection and protection solutions effectively?
One of the most beneficial parts of AI regarding fraud detection is how much quicker compared to a human. A well-established AI service that leverages machine learning algorithms can measure significant amounts of data, analyse information and compare it to other data to determine customer behaviours and identify unusual activities. The more familiar an AI solution can become with fraudulent activities compared to normal behaviours, the quicker it will be at detecting and reducing financial fraud and scams.
AI can explore data and make sense of information many people view as meaningless. By applying AI to data streams from various sources into warehouses, data analytics solutions can transform this into usable structured data, enabling simple fraud identification.
Aside from the quicker response regarding complaining and analysing data, AI will be more accurate. Manual fraud detection actions typically incur false positives, meaning various legitimate transactions can be flagged. AI, however, reduces the chances of these types of errors occurring.
How can the power of AI strengthen internal and external communications?
A major part of any structured fraud detection and prevention strategy is delivering efficient communication within a financial organisation and externally with customers and other related groups. The automation solutions available with AI can improve and streamline communications when dealing with fraud-related activities. From an internal standpoint, AI-drive communication automation will remove the requirement for employees to send notifications manually to selected teams or people. Financial companies can apply AI to automate recurring reports and remind people to produce fraud prevention budgets when required, reducing costs, time and effort associated with chasing people for the necessary information.
Other time-focused activities like risk management can be automated with AI, enabling finance companies to focus their time and resources towards high-value projects. Similarly, AI can automate external communications, like identity verification and two-factor authentication processes. If there is a case of fraudulent activity, AI can also help generate automated alerts by email, voice and through banking apps.
AI can also automate many activities associated with compliance monitoring, ensuring banks and other financial organisations avoid penalties for not meeting various regulations.
The added benefits of using AI to tackle fraud
Not only will AI help financial organisations and their customers save money and make money. By applying AI to strengthen efficiencies, remove false positives and stay compliant, finance companies can enhance customer experience, delivering more loyal and trusting customers.
It’s proven more profitable to keep customers than to acquire new ones. Costs multiply when securing new customers than to retain a current one. Furthermore, 65% of a business comes from existing customers, emphasising the importance of secure fraud detection and prevention potential to increase customer experience. Furthermore, securing customers means not thinking about them switching to competitors.
While many companies provide effective AI solutions, very few have created a comprehensive system capable of managing various AI solutions and communication tools. With this in mind, banks and financial companies should focus on vendors and ensure that vendor platforms can integrate with their existing systems and infrastructure, enabling seamless operations and data exchange. When choosing the right vendor, there are additional factors to consider, such as training and support offerings and scalability and performance potential. These factors will significantly impact the short and long-term success of adopting and integrating AI.
Furthermore, it is beneficial for financial organisations to research a vendor’s reputation and acquire feedback from existing customers to determine if its AI solutions will be an appropriate fit. Finance companies should always examine AI and communication vendors for security certificates, being cautious of those using self-certification techniques. Ultimately, customers won’t trust banks to protect their financial information if the bank cannot protect itself.
