Why customer should be the first port of call in bank fraud detection

The traditional method for banks to fight fraud includes a combination of anomaly detection software and manual oversight looking for financial transactions that appear fraudulent. It is largely invisible to the customer in order not to be an inconvenience. It can be effective, but inevitably includes mistakes: good transactions are blocked, distressing and upsetting the customers it is designed to protect; and fraudulent transactions are still allowed. The focus is effectively on the customer – is this customer transaction fraudulent?

The new survey indicates that these current bank priorities may be wrong; and that the banks are beginning to recognize this. Authentify, one of the sponsors of the survey, notes that the report shows that customers are not the problem. The banks report that the three leading causes of fraud are card-not-present (56 percent), data breach at a retailer or processor (53 percent), and POS skimming (47 percent) – all root causes over which the consumer has very little control. “However,” says Authentify, “when asked how a fraud incident was usually detected, 82 percent of banks said that it was when a consumer notified them.”

“Customers need to be given more credit,” said Authentify’s president & CEO Peter Tapling. “They know what is supposed to be happening in their account and can recognize a fraudulent transaction right away. This is evident in the survey, with banks recognizing that 82 percent of fraud events are brought to them by the account holder.”


The best way forward in the fight against fraud, says Authentify, is to more fully engage rather than shield the customer. “Today,” said Tapling, “with advances in out-of-band technologies and the proliferation of smart phones and other smart devices such as tablets, it is much easier to proactively engage the user in the war on fraud.” The solution, he says, is for customers to use small, convenient apps on their smartphones or PCs, enabling the legitimate account owner to review and approve or cancel transactions that are about to execute against their accounts. 

“By taking these steps the bank strengthens the relationship and achieves an overall higher level of trust,” he added.


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