Financial fraud is a genuine concern for banks, payment providers, and other financial institutions. A few years ago, 71% of organizations in the U.S. were victims of attempted or actual financial fraud, including identity theft in online transactions, application fraud for multiple account access attempts, and the rise of bots to collect information.
With fraud detection software for banks, financial institutions can lower their risks in the increasingly hazardous environment where fraud is becoming more costly.
Types of Bank Fraud
To face fraud head-on, it’s essential to understand where these risks originate and how prevalent they are.
Banks should be aware of multiple fraudulent activities, including but not limited to the following:
- Credit card/payment fraud: Since 2021, fraud attacks have increased on corporate and commercial credit cards, mobile wallets, and ACH credits.
- Identity fraud: Identity fraud cases have been rising over the last ten years, according to the FTC, and they are the most common type of report filed.
- Application fraud: Up to 10% of banks’ bad debts result from application fraud, and each fraudulent credit card application can cost a financial institution approximately $1,000.
- Money laundering: An estimated $2 trillion, or 2-5% of the global GDP, is laundered globally in one year. However, it is challenging to accurately assess the amount of money laundered each year due to its stealthy nature.
- Insider fraud: Whether malicious or negligent, threats from internal sources such as employees, contractors, or third-party vendors are rising; up to 34% of businesses globally experience this type of fraud yearly.
The Solution for Banks? Artificial Intelligence
Fraud detection software for banks is critical, and artificial intelligence has been a game changer. Using AI-based systems can help banks lower their risks of being harmed by fraudulent activities. In fact, as of 2023, 31 percent of banks and financial institutions will use this technology to protect their businesses. The most impactful ways banks utilize this technology are:
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Real-time monitoring
One of this technology’s best uses is analyzing real-time transactions to detect anomalies and fraudulent attempts. AI excels at seeing patterns and spotting potential problems as they occur, whereas it would take a human much longer to identify the same fraudulent practices. This continuous monitoring allows financial institutions to see threats as they happen instead of after the damage is done, saving time and money.
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Large sets of data
AI-based systems can also assess large data sets to identify synthetic identities better to prevent application fraud. The more you use AI to evaluate data and identify fraudulent applications, the smarter it becomes. The ability to search out would-be application fraud before it happens is a solution AI is uniquely qualified for and can save valuable resources.
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Transactional fraud detection
Last, AI can analyze transaction data to determine any transactions that fall out of the typical pattern. For example, AI can reject suspicious transactions or alert banks to investigate them further. This allows for quicker and more targeted investigations. In turn, AI learns from investigators’ results, allowing it to provide more accurate information in the future.
Detect Financial Fraud with Fraud.net’s AI Solution
If you’re ready to take your fraud prevention to the next level, Fraud.net’s suite of solutions is here to serve your business’s unique needs. You can mitigate ongoing risks more effectively with various AI fraud detection and prevention approaches, including Transaction AI. Fraud detection software for banks is an essential part of banking in today’s age, and Fraud.net is here to help.
Schedule a demo with one of our solutions consultants today to learn if AI fraud detection software is right for you.