2 weeks Ago
Craig Costigan, CEO, NICE Actimize . Does AI's agility make it the Superman of fraud fighting? In today's digital age, financial institutions and other businesses face numerous fraud threats that require sophisticated, agile prevention, so I think the answer is a strong "yes." Here are some of the reasons why this is true.
Advanced AI provides comprehensive fraud prevention and management, and by leveraging this technology for real-time detection, decisioning and continuous adaptation, we can stop the bad guys. Artificial intelligence-infused solutions ultimately help secure a business' ecosystem from bad actors. Our financial institution customers are currently investing in advanced technology and analytics to protect consumers and the institutions themselves from fraudsters.
For example, technology that fights scams and money mules is being adopted to combat the numerous new types of fraud appearing on the horizon. One such recent example is the "Safe Account Scam." Fraudsters tell consumers their accounts are under attack and convince them to transfer their money to a "safe" account they've secured for the individual.
With the right technology, banks can identify this scam and stop their customers' payments before it's too late. Nearly everyone who banks online nowadays must rely on secure identification and authentication technologies whether they realize it or not. AI is a driver behind the improvements in this area.
A side impact is that as more consumers and businesses turn to online bank account management and other digital banking products and services, the traffic into bank branches has significantly reduced, leading to a reduction of brick-and-mortar branches in some areas. Interestingly, most people think conducting transactions personally at a branch is safer. The reality is that all means of transacting, both digital and in-person, using ATMs and bank tellers, carry fraud risks.
According to our company's 2024 Fraud Insights Report, the branch-based deposit fraud rate for established accounts has decreased by 21%, but both ATM (+4%) and mobile (+17%) fraud rates by volume have increased. Coupled with increases in the average loss per check deposit, this results in the growth of fraud by value for established accounts. And then there is check fraud.
Check fraud still poses a significant threat to both consumers and banks. The numbers speak for themselves. Our research shows a shocking 31% surge in the value of attempted check fraud in the past year compared to 2022.
This translates to a substantial financial loss for institutions, averaging $4.90 per check deposit. The FBI's report of over 13,000 instances of check and credit card fraud reported to the IC3 in 2023 further underscores the severity of the issue.
Online banking is here now and will only grow in importance as innovative new services are launched. There are many good reasons to love online banking, but think of the flexibility that online and mobile payments offer us. We can send money to our kids via Zelle or pay our landlord online without worrying if the check is lost in the mail.
Anytime, anywhere, we can transfer funds, pay bills or monitor transactions, in most cases in real time or near real time. Digital is faster, more accessible and certainly more cost-effective. And AI makes this work more reliably and more quickly.
Fraudsters And AI: A Clear And Present Danger One of the world's biggest threats is fraudsters' increased use of AI across multiple fronts. Many criminals use generative AI to improve the grammar and believability of their phishing emails and scripts. Deepfake video calls have been leveraged for business email compromise (BEC) fraud, such as impersonating a CEO or CFO.
Thanks to AI, we believe it is highly probable that we will see increased sophistication in fraud attacks. Our industry data also shows a significant shift in domestic wire payments related to scams: a 44% increase in investment scams by value and 17% by volume and a 133% increase in romance scams by value and 50% by volume. These fraud typologies are often of higher value, which results in increased losses.
Fraudsters use AI to make these scams more convincing and get more money from their victims. However, purchase and impersonation fraud remain the lion's share of fraud . When making online purchases, it probably is fraud if the deal sounds too good to be true.
Fraudsters lurk on social media platforms and online marketplaces, impersonating legitimate brands and posting fake ads and products for sale. As the saying goes, trust but verify. Even the safest and most careful among us have encountered fraudsters.
If you haven't yet, when you do, it's essential to report the activity immediately to your providers, change your passwords and check your credit reports for unusual activity. If you are not applying for credit, you might also consider freezing your credit reports (Experian, TransUnion, Equifax) so fraudsters can't open accounts in your name. You can easily unfreeze your credit when you want to open a new account.
But in the meantime, the financial institution you bank with, the ATM at the corner and the holder of your credit card have probably integrated AI as a tool to make the experience smoother and safer. Not everyone wears a cape, but if a technology could, it would undoubtedly be artificial intelligence in all its forms. Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives.
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