Real-time fraud detection: Essential for businesses with real-time payments

06 Apr, 2023 . 4 minutes

Real-time fraud detection is critical to any online business, especially those using real-time payment systems. It requires constant vigilance and proactive measures to ensure that fraudulent activities are identified and prevented in real-time.

The anticipated growth of the fraud-detection and fraud-prevention market highlights the increasing importance of staying ahead of fraudsters and protecting businesses from potential financial losses and reputational damage. With the market expected to exceed $63 billion by 2023, businesses that fail to keep up with fraud prevention measures may find themselves vulnerable to new and emerging threats, with devastating consequences.

On top of that, the global real-time payments market is projected to record a compound annual growth rate of 33.5 percent between 2023 and 2028. Therefore, businesses must remain vigilant and invest in up-to-date fraud prevention technologies and strategies to safeguard their financial assets and reputation.

Why accelerating real-time fraud prevention matters?

Real-time fraud prevention is essential because cybercriminals use sophisticated financial crime strategies to accelerate their fraudulent activities further.

For example, with the ability to create synthetic IDs and steal user credentials in a matter of seconds, fraudsters can manipulate businesses and individuals into making instant payments, leaving little time for banks or their customers to protect themselves.

Moreover, it can take a long time to detect fraud, and with the increasing prevalence of online shopping and card-not-present transactions, this trend is likely to worsen. Therefore, banking fraud departments must review their strategy and tools and leverage real-time data to quickly identify and prevent fraudulent activities.

For that, fraud detection is becoming a significant challenge for financial institutions. Smaller banks, credit unions, and lenders may face additional vulnerabilities as they often rely on outdated systems and manual analysis processes, which can take hours or even days to review. This significantly burdens teams and can result in largely ineffective results.

Traditional fraud detection tools require significant manual input, lack transparency, and are often based on decades-old technology. To effectively combat modern fraud, banks need to adopt real-time fraud detection platforms that support omnichannel communication, near-instant data syncing, automated workflows, and machine learning for continuous optimisation and adaptation to new fraud patterns.

These platforms must also provide fast, customer-centric workflows to avoid abandonment rates and be easily integrated into existing anti-fraud processes.

While real-time fraud detection was once only accessible to large, enterprise-level banks, advancements in data partnerships have made this technology affordable and accessible to smaller financial institutions. By leveraging tools that aggregate data and transform it into business decisions, banks can strengthen their fraud detection capabilities and protect themselves and their customers from potential financial losses and reputational damage.

How to accelerate real-time fraud prevention?

Increasing the speed of fraud risk analysis is crucial in fraud prevention as it can save time, money, and reputation. Accurate analysis can reduce false positives and ensure a positive customer experience.

There are several ways to effectively accelerate the fraud risk analysis process:

Firstly, it is essential to identify bottlenecks that slow down the process. Inefficient technology, overreliance on information technology, or working with siloed data can cause such bottlenecks.

The next step is to understand the technology suitable for each step of the process. The chief technology officer and IT team can provide insight into the best platform, such as robotic process automation or artificial intelligence with machine-learning capabilities.

Lastly, keeping the process simple for employees is essential to accelerate fraud risk analysis. Businesses can achieve this by using no-code solutions or integrating new solutions with legacy software. It's also helpful if the new technology offers employee training sessions to ease the transition.

Fraud trends to watch

As fraudsters become increasingly sophisticated, individuals and organisations must stay vigilant and aware of the latest fraud and identity theft trends. Here are some types of trends that remain in trend or show an increase in terms of occurrence.

  1. Synthetic identity fraud

This is a type of fraud where a fraudster creates a new identity using a combination of real and fake information. The fraudster can then use this identity to open bank accounts, apply for loans, or obtain credit.

Synthetic identity fraud is difficult to detect because it often involves the use of real information.

2. Cryptocurrency scams

Cryptocurrency scams have been on the rise in recent years, with fraudsters using various tactics to trick individuals into investing in fake or fraudulent coins. These scams include phishing emails, bogus investment opportunities, or Ponzi schemes.

3. Deepfake fraud

Deepfake technology allows fraudsters to create realistic videos or audio recordings of individuals saying or doing things they never actually did. This technology can be used for various fraudulent purposes, including impersonation, blackmail, or spreading false information.

4. Payment fraud

Payment fraud involves the use of stolen payment information to make unauthorised purchases or withdrawals. This includes credit card fraud, ATM skimming, and account takeover attacks.

5. Business email compromise (BEC) scams

BEC scams involve fraudsters impersonating company executives or suppliers to trick employees into wiring money or sharing sensitive information. These types of scams often involve social engineering tactics and thorough impersonation.

6. Ransomware attacks

Ransomware attacks involve hackers encrypting a victim's files and demanding payment in exchange for the decryption key. These attacks can devastate individuals and businesses, often resulting in significant financial losses and data breaches.

7. Account takeover fraud

Account takeover fraud involves fraudsters gaining access to an individual's account through stolen login credentials or other means. Once they have access, they can make unauthorised purchases, transfer funds, or steal personal information.

All in all, real-time fraud detection is vital to any online business that uses real-time payment systems. As the fraud detection and prevention market continues to grow, businesses must remain proactive and invest in up-to-date fraud prevention technologies and strategies to protect themselves and their customers from potential financial losses and reputational damage.

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