How to combat fraud in a hybrid banking environment

EVENT COVERAGE: SAS WEBINAR How to combat fraud in a hybrid banking environment

Financial organisations are called to take the offensive against fraudsters with the use of anomaly detection and analytics.

It’s time for the financial industry to turn the tables and stop playing catch-up to fraudsters using anomaly detection and analytics in combating these subconscious biases of people and helping them make advanced analytics and anomaly detection technology, industry experts told attendees of the webinar ‘Fraud surveillance in today’s hybrid banking environment’ co-hosted by SAS and Asian Banking & Finance on 23 September.

Over 190 bankers, financial leaders, and tech experts from all across Asia gathered together to learn more about modern fraud tricks and the best ways to combat fraud in their organisations.

Dr. Steve Bennett, Director, Public Sector and Financial Services Practice at SAS kicked off the webinar with a presentation on how fraudsters are taking advantage of peoples’ cognitive biases to hoodwink them.

“People are very risk averse, when they’re talking about gains, and they’re very risk seeking when they’re talking about trying to avoid a loss. And this really destroys rationality when people need to make decisions when data or information is uncertain,” Dr. Bennett told the over 190 participants of the webinar.

Dr. Bennett emphasised the role of rational choices, and in turn combat fraudulent activities. As an example, he shared how SAS worked with India’s National Health Authority to help detect fraudulent claims and activities for India’s national program of health benefits. They made use of anomaly detection, artificial intelligence, and computer vision (looking at photographs and patient records) and detected thousands of anomalous claims to the tune of around $10m. The numbers at stake are even higher in the financial industry; in the US, financial institutions lose hundreds of millions of dollars yearly due to social engineering tricks employed by fraudsters. In Singapore, close to $200m have also been lost by local institutions over the past 10 years due to fraud—and the recovery rate is only 35%. So how do you build a strong antifraud system from the ground up? Dr. Bennett has one key advice to offer: start small. “The good news about advanced

analytics and AI is that it’s possible to start small. In fact, we usually recommend that often when institutions say, ‘we’re going to change everything all at once, we’re going to enterprise wide revisions of how we do fraud detection’—often those are the analytics projects that fail. It’s Two-factor authentication and real-time transaction blocking are often better to start small: pick a small problem, with a manageable data set that you can work on for a few months at low cost, and prove value,” Dr. Bennett said. not enough to combat the changes in the fraud landscape Break away from one-channel focus Manisha Khanna, Head of Financial Services, Customer Advisory at SAS Singapore, noted that organisations in Singapore have sunk in a large amount of investments to upgrade their tech over the past few years—but added that they have been very focused on just one channel, and not exactly for combating fraud risks. “Investments have gone to technologies like two-factor authentication and real-time transaction blocking. But they are not enough to combat the changes in the fraud landscape, because now fraud is going across channels,” she warned. The biggest challenge, according to Khanna, is that there is still a lot of legacy in banks. “Many organisations still see digital fraud as a channel-specific problem,” she said. And the reason for this is legacy. They are already specific point solutions, which only look at, let’s say, card fraud, or an internal banking fraud. Perhaps there’s a need to step back and see how all of these fraud attacks can be addressed more holistically.”

United we stand

Alex Kwiatkowski, Advisory Industry Consultant, Global Banking Practice at SAS, theorised that banks may now want to speak openly with each other, in private, about the fraudrelated challenges their organisations are facing. “The attitude now is, we are much stronger when we share this knowledge amongst ourselves, because then we can identify anomalous patterns, then we can start to make some adjustments, tightening up where there’s been vulnerabilities,” Kwiatkowski said.