Current trends: Risk and fraud

Jul 10, 2017

Can financial institutions move money across borders whilst ensuring security?

Money is flowing faster than ever before. Global payment infrastructures are adopting faster payments and real-time settlement. High speed transactions make it more convenient for consumers to move their money anywhere in the world. However, the ability to move money swiftly across borders is one thing; moving it securely is another.

As financial institutions (FIs) continue to meet customer demands for anytime, anywhere services, the current emphasis is the FIs ability to provide the right security and know-your-customer (KYC) risk scoring aligned with the speed of transactions.
Consumers and businesses want faster settlement systems, multichannel options, and easier access to payment initiation. But as settlement risk goes down, fraud risk goes up. The threat of greater fraud looms because with real-time settlement, there’s less chance to recover a fraudulent payment. Once the money has gone into the marketinfrastructure and potentially moved among multiple parties quickly, recovery becomes extremely difficult.

With these technological trends, the industry should also be prepared to deal with the following factors, which will have wide-ranging implications:
Firstly, customers demand more from their financial services. Consumers want immediate access to payments, but also want peace of mind on security along with speed. According to Expectations & Experiences quarterly consumer trends research from Fiserv in the U.S., 68 percent of respondents have needed immediate access to money from a check. Whilst, 81 percent ranked security over convenience in payment methods. This underscores that speed and security should go hand-in-hand, and are crucial from a financial management standpoint.

Likewise in Asia, a study by McKinsey & Company, titled “Digital Banking in Asia: What do customers really want?” indicated that the top requirements of digital-savvy bank customers, including quality of basic services, the strength of the financial products, brand reputation, and the quality of customer service and experience. The findings also pointed out that simplicity and security are critical requirements in the overall digital banking experience.

Other important factors
Fintech companies will continue to disrupt the industry with innovative technology. As fintech companies flourish and offer innovative services, FIs must assess the impact these technologies have on their payments business. Those alternatives may come with a higher risk, which could then lead to reduced trust from consumers in the whole process. Some Fintech companies will have to play catch-up to reach the level of security required for managing payments.

Lastly, financial criminals will become more sophisticated. As more payment channels are used, malicious software that monitors initiations or transactions could become a greater threat. Once criminals get hold of the money, they often funnel it through legitimate assets, making it harder to identify the original theft.

FIs must strike the right balance between keeping customers safe from criminal threats and providing a positive experience. Whilst they need to safeguard against fraud, they also need to avoid negative customer service, such as a card being blocked, or people not being able to access their money. This new environment demands greater efficiency and stronger management of false positives – errors in the evaluation process in which a condition tested for is mistakenly found to have been detected – so that the customer receives a great experience.

People and businesses also demand mobility, convenience, and speed without fraud prevention raising red flags when not necessary. Fraud detection tools that set arbitrary barriers, such as flagging transactions when they are above a certain amount, can often lead to false positives. The security put in place by FIs should improve, rather than hinder, the customer experience.

Hybrid analytics
For FIs to achieve the right balance, they may want to consider using hybrid analytics. This is a sophisticated technique that leverages a broader set of data from outside sources to analyse transactions in real time. The process identifies the nuances of behaviours that indicate fraud in an operationally efficient way. By using hybrid analytics, a series of layered checks and balances can be established across a transaction‘s lifecycle to help ensure that when a payment is going through, it should be consistent with previous outcomes and isn’t out of the ordinary. Solid fraud protection requires monitoring of the entire flow of the transaction, rather than targeting one specific point. Hybrid analytics can provide that holistic view.

As consumer demands for faster payments continues and new payment technologies become available, FIs need to meet these needs whilst protecting themselves and their customers’ money. Whilst slow payments can be frustrating, having payments going into criminal accounts is worse.

Striking the right balance means customers can bank how they want, safe in the knowledge their money is secure. By Andrew Davies, VP, Global Market Strategy, Financial Crime Risk Management, Fiserv


Fiserv, Inc. (NASDAQ: FISV) enables clients to achieve best-in-class results by driving quality and innovation in payments, processing services, risk and compliance, customer and channel management, and business insights and optimisation. For more than 30 years, Fiserv has been a global leader in financial services technology. This year, Fiserv was honoured to be named a FORTUNE® magazine's World's Most Admired Company for the third consecutive year; in 2015 the company was recognised among Forbes magazine's America's Best Employers. Fiserv drives innovation that transforms experiences for more than 13,000 clients worldwide including banks, credit unions and thrifts, billers, mortgage lenders and leasing companies, brokerage and investment firms and other business clients.

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