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High-Tech Fraud Prevention in Financial Services

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    High-Tech Fraud Prevention in Financial Services


Change is the only constant in fraud prevention. Criminals are becoming more sophisticated over time, exploiting loopholes and weaknesses in any and every system used by financial organizations. Unless companies stay current with their defenses and anticipate potential risks, they may find themselves outpaced by data thieves.

Thankfully, the IT departments at banks and other financial institutions have many new and advanced technologies that can keep their defenses strong, no matter how fast fraudsters evolve. The latest developments, including artificial intelligence and blockchain ledgers, may represent the difference between safe and compromised networks.

The following are three of the latest developments that companies are pursuing in their quest to outrun thieves and fraudsters.

1. Automated Monitoring

As with many back-end systems, financial technology is becoming heavily automated. The decreasing reliance on human oversight to process transactions has increased the speed and efficiency of banking, but it could also be considered a liability. After all, if transactions are moving too quickly to oversee through conventional, hands-on means, hasn't this opened a door for fraudsters to interfere?

According to Financial Executives Daily, the answer may lie in more automation. Companies that develop automated routines that scan transaction records continuously can flag problems as they arise, based on the telltale signs of fraud. These systems act as deterrents in two related ways. First, they provide a digestible summary of risk factors when data is moving too quickly for human oversight. Second, they act as a deterrent for bad actors who may be dissuaded from fraud because of the presence of monitoring systems.

2. Artificial Intelligence

While anti-fraud monitoring has come a long way in recent years, its evolution is ongoing. This is especially clear in the increasing use of artificial intelligence and machine learning, which involve analytics programs with their own internal self-improving logic. As internal and external threats become more complex over time, such processes will coninute to crack down on harmful behavior.

Vian Chinner, CEO of Xineoh, an AI developer, pointed out that fraud prevention systems equipped with AI can be more user-friendly than their older counterparts. Machine learning can adapt to human behaviors, determining intelligently which actions are natural parts of financial operations and which are signs of fraud, which leads to highly targeted problem detection with fewer false positives.

3. Blockchain Technology

While automation and AI are ingrained in finance, there are yet more ideas on the horizon. Blockchain ledgers has made its name as the infrastructure behind cryptocurrencies such as bitcoin, at least thus far. In the next few years, however, blockchain could become far more mainstream in sectors such as finance and the supply chain, where secure and consistent data interchange is essential.

The IBM blog recently extolled the fraud-prevention potential of blockchain systems, with real-time data sharing being its major benefit. Fraud can occur when processes are drawn out or conducted over multiple steps where criminals can interrupt and interfere with transactions. Communication in a blockchain ledger is more direct. All parties' records stay consistent with one another and updates occur simultaneously. These distributed systems are hard to tamper with and merit further investigation.

Preparing for the Financial Future

Fraud in financial departments or banking organizations is one of the most straightforward types of digital crime. A company's defenses are the only thing protecting its coffers from cybercriminals. Updated systems are therefore an inescapable priority if these businesses want to watch out for all types of risk. There are numerous angles for fraudsters to attack from. Employing a stolen customer or employee identity is one such method. Another is carrying out fraud from within a company's own ranks.

Reach out to Identity Guard Business Solutions to learn about modern approaches to fraud prevention - now with IBM's Watson.

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