Credit Unions

Fighting CNP Fraud With 'Data Collaboration'

PSCU data analytics

There’s nothing new under the sun, goes the saying — but when it comes to payments fraud, there are new ways to do it.

As the coronavirus pandemic rages on, and as card-not-present (CNP) transactions present new vectors for fraudsters, financial institutions (FIs) — specifically credit unions (CUs) — need to find new ways to combat them.

Jack Lynch, PSCU senior vice president and chief risk officer, told PYMNTS that the use of advanced data analytics and joint efforts between CUs can be effective at predicting and stopping fraud attempts before they can compromise members’ information.

That’s especially important as the bad guys are even using scams tied to the World Health Organization (WHO) and Centers for Disease Control and Prevention (CDC) to trick unwitting victims into granting access to that data — and, ultimately, their accounts.

“There has to be more collaboration between CUs, and not just in terms of talking with each other,” he told PYMNTS. “I look at it as ‘data collaboration.’”

That collaboration needs to move beyond risk scores based on how various card portfolios may be performing. Lynch noted that PSCU’s proprietary Linked Analysis tool helps develop holistic insight into consumers’ transactions across a range of data sources, interactions and channels spanning call centers, interactive voice response (IVR) and devices.

By leveraging data, machine learning and collaborative efforts, CUs can pinpoint the fraudster that has begun attacks on the West Coast, for example, and analyze the “cadence” of activity to determine whether the attacks are moving across the country toward the East Coast.

In this way, Lynch told PYMNTS, CUs can clamp down on attacks before they are successful.

The cross-pollination of data and insight, he said, “means there is not a constant relearning for each credit union.”

To get a sense of the data that can be collected, analyzed and shared, Lynch offered the example of a fraudster’s hypothetical call to a call center from Chicago (where the phone is located), but where Verizon data shows the phone is based in Los Angeles.

PSCU works with Pindrop, a voice security and authentication company, to analyze 147 different factors tied to phone call audio to create a “unique signature,” which helps fraud analysts determine whether callers are legitimate.

Through a dynamic approach to data collection and analysis, “we're able to start marrying that information and create patterns that we never could see before,” said Lynch.

Gaining a 360-degree view of the customer will become even more valuable as the economy reopens, and as we move toward a “hybrid model” in which online and offline commerce is connected by the common thread of digital payments.

“Some of these changes in consumer behavior are going to be permanent,” Lynch predicted, adding that CNP activity was already accelerating before the pandemic and that contactless payments have been more firmly embraced.

Surveys have shown, too, that consumers are likely to continue these new behaviors even as life returns to some semblance of normalcy.

For CUs, said Lynch, it’s time to get ready for the “self-service branch,” where a greater continuum of services will be done through tech-driven, digital processes.

There’s an opportunity to aggregate enough data in context to anticipate what members will need during their daily financial journeys, and to suggest financial products and services that are especially relevant.

Regardless of how the landscape may change for CUs as the economy (eventually) returns to normal, Lynch told PYMNTS that “it's time for everyone to take a look at their digital banking strategy — everything from offers to how they open their accounts.”



About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.