Opinion Piece - Fraud is escalating
Advanced solutions and an enterprise-wide strategy are urgently needed
Fraud is a significant problem for local and international organisations and is growing exponentially. In the digital world, faceless contact self-service centres and virtual platforms represent a ripe feeding ground for identity thieves. To address this issue, companies need new solutions and multi-layered enterprise-wide fraud strategies. However, the question is can it be done without impacting productivity, pace of business and most importantly, the consumer experience? The answer is yes. What is needed is a multi-layered fraud prevention solution capable of employing multiple fraud strategies per product, channel, type of business and location simultaneously.
Perpetrators are increasingly using stolen identities together with digital devices and technologies to acquire loans, credit facilities, goods and services fraudulently. The impact on profits is considerable. A 2014 Nielson Report put global losses due to fraud at almost R136 million, however, this is not the only issue businesses are concerned about. Fraud is also alienating consumers, limiting organisations’ potential expansion and growth opportunities in the digital realm and making it difficult for them to comply with regulations.
The challenge is that many solutions used by businesses to protect themselves against fraud are often siloed, requiring heavy manual processes and negatively impacting customer service. Furthermore, the manual solutions do not adapt to rapidly changing fraud tactics.
In today’s environment, businesses need to go beyond verification. They need to embrace the invisible layers through and across the enterprise, using predictive technologies to provide a seamless experience for consumers, while lowering risk. This will allow the business to make smart contextualised, rather than silo-based decisions. Organisations also need to ensure fraud solutions and strategies remain one step ahead of ever-evolving fraud schemes, leveraging a comprehensive approach that includes identity verification, channel verification and authentication. When used together, the solutions are able to deliver far more than what seems possible at first glance.
Fraud solutions tailored to meet market requirements
Fraud prevention makes use of hundreds of rules, using various layered security approaches at each stage in the interaction or relationship. From consumer acquisition to collections, users are scored according to the risk they represent. Their score or rating then determines whether they are routed into further security clearance or if they are allowed to pass through in the transaction process.
The fraud solution of the individual will, for example, be affected if the work number provided by the person is a payphone, or if the identity number used by the person is found on a shared fraud database or any other potentially fraudulent behaviour is identified. Further checks will then be implemented as needed per channel, product or location.
Algorithms also ensure that anomalous patterns, behaviour or velocities associated with devices are identified. For example, if a device or identity number is used to open multiple accounts in different geographies in quick succession, the risk scoring will be high.
Among the many layers of security are the following:
• Identity verification may encompass fingerprint and voice biometrics, as well as identity verification. Voice biometrics can identify the speaker by unique vocal characteristics such as pitch, speed, accent and dialect. Layered Voice Analysis (LVA), when compared with known incidents (e.g., recordings of commitments to pay that have and have not been met) can help identify risk. An ID can be verified against multiple databases – e.g., ID issued, surname matches ID, deceased or emigrated person. Furthermore, knowledge bases can be used to ask an existing client one of hundreds of questions only that person would know the answer to (rather than the four or five questions currently asked).
• Channel verification provides another layer of security in the background. Geographic location can be determined even if a fraudster is using a Proxy Anonymiser to hide their location. Today’s service offerings need to be able to pierce through the proxy to determine the actual origin of the transaction. Devices are verified against a Mobile equipment register. The EIR or Equipment Identity Register data allows companies to identify high risk handsets, high number of SIM cards in use and other fraudulent behaviour.
The benefits include operational efficiencies, growth, an optimised customer experience and compliance.
Big benefits, fast implementation
Perhaps the most important benefit for the organisation is that a multi-layered, flexible rules-based fraud prevention solution, using advanced technologies, will ensure that various fraud prevention components are activated only where high risk is detected, ensuring the consumer’s experience is only impacted where risk is identified.
This will assist organisations to boost acquisition rates and reduce the time taken when processing the good consumers. It will also help organisations introduce new channels, such as web and mobile, with confidence and increase account open rates by allowing remote consumers to make use of a self-service option to get on board.
These solutions can additionally improve compliance with industry regulations like Know-Your-Customers (KYC) and anti-money laundering ordinances and lead to process improvements. Performance can be monitored against strategic goals and opportunities for improvement can be quickly identified.
Operational efficiencies can also be gained. Automated, multi-layered systems reduce the need for costly manual reviews and enable greater consumer self-service (eg, PIN and password resets, online account creation and change of address). With a flexible and configurable rules engine in place, companies can quickly adapt strategies to stay ahead of savvy fraudsters and changing consumer expectations.
What will it take to get such a system in place? Implementation of a multi-layered system can be done in as little as four to six weeks with ongoing monitoring, refining and expansion of the system based on actual performance. It will improve business expansion into the digital realm, allow businesses to easily comply with regulations and most importantly, ensure a better customer experience.