The keys to fighting fraud?

We’re constantly being warned that fraud is one of the biggest threats facing the banking industry, but the true scale of this was revealed by a recent survey that suggests it could make up as much as half of all crime.

The figures come out of the UK, where the country’s Office for National Statistics has estimated nearly six million fraud and cyber offences were committed in England and Wales in 2015. This equates to around one in ten adults in the nation falling victim, with the majority of these related to banking fraud.

This is far higher than has been previously acknowledged, in part because these type of offences often go unrecorded.

Who’s bearing the brunt?

One reason it is often underreported is that for many consumers, the impact of fraud – while being a serious inconvenience – is not  often a problem that actually results in long-lasting harm. Of the 3.7 million recorded cases of fraud, 1.4 million resulted in no financial loss to the consumer, while in 1.6 million cases, victims were fully reimbursed by their banks.

This may explain why so many people still show poor attitudes to issues such as online security, as they do not experience the financial consequences of this. Instead, it is banks that bear the brunt of the problem, which is why it’s so vital for financial institutions to make improving fraud prevention a top priority.

However, while consumers may not financially suffer, they still find it frustrating if they have to go through the process of reporting fraud or having cards reissued, and this will reflect badly on a bank if consumers feel they aren’t being adequately supported.

It has been suggested by commissioner of London’s Metropolitan Police Sir Bernard Hogan-Howe that one way to tackle cybercrime such as online banking fraud would be to stop automatically refunding customers unless they can prove they weren’t negligent. But this is not a practical way forward, as if banks were to do this, customers would be likely to take their business elsewhere. Instead, banks need to show they are working hard to cut down on fraud.

Investing in education

One way the industry can do this is to devote more resources to consumer education. There have already been some efforts to improve this in the UK, such as a TV advertising campaign from Barclays advising customers on how they can spot a fake phone call from a fraudster purporting to be from their bank.

But much more needs to be done to counter the problem. Efforts need to take place across all channels and be part of an industry-wide approach to get the message across, rather than a series of independent initiatives by single institutions that may be confusing to users.

For instance, in addition to explaining what information employees will and will not ask for on the phone, awareness needs to be raised about issues such as card skimming at ATMs and POS machines, as this continues to be a problem that plagues the industry – yet it’s one that could be greatly reduced by greater vigilance from consumers when using these devices.

Becoming more proactive

Of course, user education must be viewed as just one part of a holistic approach to improving fraud. Not all fraud can be traced back to mistakes by consumers, and there are many incidents that even the best-informed customers can do nothing about.

Improving fraud detection technologies to be more proactive is another key step for banks. A key strategy here is leveraging big data and machine learning technologies, which can be used to identify emerging trends used by criminals and flag up potentially fraudulent transactions before any losses occur.

There’s no single solution to tackling fraud, but by taking a positive approach and using the technology that is available effectively, banks can help ensure they regain the upper hand in the ongoing arms race against the fraudsters.

Written by Dena Hamilton

Dena Hamilton

Dena is NCR's Director of Enterprise Fraud & Security Software Solutions. She specializes in fraud, risk, compliance and security, with over 35 years of experience in the financial services space. Her focus is the development and deployment of enterprise financial crime solutions optimized in prevention, detection and back office efficiency.

Read more articles from Dena Hamilton