A PwC study found 49% of global companies surveyed said they’ve been a victim of fraud and economic crime. Banks and businesses are enduring the pain of illegal financial activities which rob from hardworking citizens, impacting entire communities. Now that technology has allowed for businesses to expand into new international markets, new strategies are needed by banks to provide financial security that customers demand. This article will look at a current problem impacting fraud management at banking, financial services, and insurance (BFSI) companiesand outline a solution to improve fraud management in a more expanded globalized market.
The Current Problem
As global commerce continues to grow at a rapid pace, businesses are able to grow expansively into new international markets. However, with increased business globalization comes opportunities for fraudulent behavior to put businesses at risk. One area that is seeing a current challenge with fraud detection and prevention is multi-channel banking services. Multi-channel banking services as the name implies is a bank that provides services over different channels, from mobile banking to ATMs. Although having multiple ways to serve your banking clients is a competitive advantage, each channel is separate from the others, a silo-like effect. This silo environment disconnects information and knowledge sharing which is crucial for fraud detection systems to operate effectively. Also, each channel comes with its own fraud detection systems and processes. Different teams and information spread across decentralized fraud units are also present. The result is a disconnected fraud framework which would benefit from an omnichannel system where all data goes to one place.
Banking is busier than ever these days. Businesses of all sizes have begun to globalize sales at a rapid pace. Technological advancement and increased supply chain infrastructure have made it easier than ever to open up new sales channels to customers in different countries. Multi-channel payment systems present unique challenges for fraud detection and prevention. In today’s multi-channel banking payment systems, fraud detection is being put to the test. A research study found that 77% of businesses say a multi-channel payments approach makes fraud more difficult to identify, manage and prevent. With confidence low in the global community, fraud detection systems are in need an overhaul to keep up with the rapid pace of globalized business across different banking channels. This same study went on to explain how businesses wanted risk management solutions that addressed multiple channels, across multiple payment types, in multiple markets. Pleasing customers with convenience through multiple ways to bank is standard in today’s world, fraud detection that works across all channels should be standard as well. A lack of centralized information to prevent fraud leads to a fragmentation in fraud management where illicit activity can go unflagged or simply overlooked. A few ways multi-channel banking systems cause issues for fraud management is a silo mentality, being outpaced by technology, and unclear data streams.
Banks, payment service providers, and financial institutions have a major cause for concern when it comes to combatting fraud in today’s global market. The major concern revolves around decentralized fraud detection networks, where each institution has its own investigative tools and processes which do not always align for the greater good. Fragmentation of fraud investigations occurs when multi-channel banking intersects with disconnected fraud measures. If fraud investigations cannot align this leads to transparency issues, making it incredibly hard for fraud investigations teams to efficiently identify where the greatest risk resides. The silo culture attach to multi-channel banking services must be eliminated to open information sharing across barriers, leading to improved oversight of fraudulent activities. When silos are present in any organizational process, it only leads to missed opportunities to provide better serviceto the customer.
Outdated, Outpaced, Outsmarted
Multichannel banking systems are effective but not in line with today’s globalized business community. A merchant in China can send a product to New York with no issues, and this can be done from a mobile device. The business world is technologically outpacing banking systems. This outpacing is exposing the multichannel systems to issues with detecting fraud that could be originating in another channel. With a silo-like approach, banking channels fraud teams will lack the transparency needed to conduct a thorough fraud analysis of transactions occurring globally. Fraudsters are opportunist and will seize any weaknesses in fraud detection for their own benefit, this cannot be allowed to happen.
Unclear Data Streams
With the current multi-channel banking systems, silos create challenges for fraud prevention activities. When banking services are disconnected they lack the ability to deliver seamless data from one channel to another leading to increased transparency into possible fraudulent activities. Without clear data streams, a holistic view of customer activity can never be established. A centralized fraud detection platform would allow for suspicious activity to be flagged and watched over multiple channels, creating a holistic dashboard of patterns and data to analyze. Without clear data streams across channels, fraud management will continue to be challenged in optimizing systems and processes to keep pace with the growth of the global business market.
What is the Solution
A key solution for fragmentation in fraud management is to aggregate fraud data into one system, an enterprise system where all activity can be monitored under one roof. An enterprise monitoring system allows for total risk and compliance management over any number of banking service channels. Creating alerts and identifying trends which can provide actionable data for companies engaging in financial services. With an enterprise platform, data can be collected from multiple channels and used for fraud management reporting, creating unparalleled transparency into real-time analytics of financial threats. Another advantage is compliance teams have more time to investigate fraud when they have a centralized, enterprise-wide system automating the data gathering across all service channels. Enterprise-wide fraud monitoring creates a holistic environment where all data is aggregated to create a three-hundred-sixty-degree view for fraud analyst. By consolidating all of the required evidence to rapidly expose fraudulent activity, fraud analyst will be able to view complex relationships on a variety of dimensions via link analysis diagrams. Visual dashboards which bring fraud data to life. The key to combatting fraud in today’s global market is to create a centralized monitoring system with attached processes that flag behavior occurring across any service channel. Transparency that increases alertness and decreases illicit financial activity. An enterprise fraud management system creates a holistic view of financial risks assisting in better decision making and reduced overall costs for the organization.
BFSI fraud management departments are facing a current challenge to how they combat fraud in today’s business age. Technology is making business anywhere, anytime easier and more convenient than ever. With this increased conveniencecomes a need for increased asset security. Banking, financial services, and insurance companies have an opportunity to decrease fraud that causes true systemic issues to the overall global economy. A centralized fraud system would be the solution that could help BFSI companies to better manage fraud over multiple platforms and channels. The time to act is now, how will those in the BSFI community act is to remain seen.