Banks’ Battle vs the Fraudsters May Be Won in the Cloud

The battle of the banks versus the fraudsters will, increasingly, be fought in the cloud.

David Excell, founder of Featurespace, told Karen Webster that advanced technologies — the cloud-native architecture, machine learning and artificial intelligence (AI) — can help banks collaborate with one another and with customers as they seek to stop scams in their tracks.

Leveraging those digital lines of defense can give banks a network-level, holistic view of transactions and make judgments about risk in real time.

“The industry can work together in a simpler way,” he said.

In this way, they can look at customers’ requests to move money in and out of accounts and whether those payments are being made for the first time, possibly uncovering accounts used by cybercriminals and scammers.

The conversation comes against the backdrop where $50 billion was lost to identity theft and bank fraud in the past year. As commercial and retail customers shift from automated clearing houses and wires to cards and digital payments, smaller banks especially need to have tools that are as robust as the ones used by their larger brethren.

With the cloud, he said, smaller financial institutions (FIs) don’t need the same organizational skill sets to deploy or maintain sophisticated fraud-fighting technologies.

Democratization of Risk Analysis 

Call it the democratization of risk analysis — through platform models and providers (Featurespace among them).

“It’s easy because the software and services can just be ‘made available’ to them,” he said, as they tap API calls and streamlined integrations.

The smaller banks need the help, he said, because the fraudsters do not discriminate when it comes to going out to attack — and they know, of course, that smaller FIs have not invested as much into their security (because they have not been able to).

The cloud, he said, can help FIs leverage best practices and protection of consumer-level data, he said. And in addition, that consortium approach can ensure that — as payments get faster and move toward instant settlement — risk is analyzed on a case-by-case basis to distinguish good customers from bad ones.

“The appropriate technology is in place to understand when there is an unusual transaction and if it needs to be challenged,” he said — which in turn helps to reduce false positives. In some channels, 100% of transactions will be scored across a customizable combination of thresholds that can include the value of the transaction, the type of payment or other parameters. There are, of course, multiple points in the flow of a card payment and different points at which the merchant, acquirers or issuers could make a decision.

He said that there’s the potential to join the data between the merchant and the banks to get different viewpoints of the same transaction.

“Customer service improves as a result,” he said.

Looking ahead, FIs will continue to invest in making sure that they can beef up the security of their systems, share information, and help alert consumers to the scams that are afoot.

Along the way, he said, “the cloud helps move toward that Holy Grail of having a complete view of what the customer is doing across each of the different channels that are available.”