The number of consumers visiting bank branches is set to decline by 36 percent over the next five years, while mobile banking usage is projected to increase by 121 percent.
Consumers turning away from bank branches and toward new connected channels are doing so in search of increased ease and convenience. The ability to bank on the go, across a range of connected channels, isn’t just giving consumers and companies new ways to interact and do business, however. It’s also presenting opportunities for fraudsters and cybercriminals — and bad actors are taking advantage.
According to recent research, fraudsters stole more than $7 billion from consumers and companies in 2016 alone, and did so on the backs of new technology and high-profile data breaches. Fraud rates are expected to skyrocket, too, with researchers projecting a nearly 200 percent increase within the next five years.
Cybercriminals are now making their gains through more sophisticated methods of attack. This means that those in charge of safeguarding consumers and companies need a smarter approach when fighting fraud, according to Martin Wildberger, executive vice president of innovation and technology at Royal Bank of Canada (RBC). That strategy must incorporate emerging technologies and be driven by data about both customers’ and fraudsters’ habits.
In a recent interview with PYMNTS, Wildberger explained how the bank is using artificial intelligence (AI), machine learning (ML), neural networks and other innovations to fight fraud and protect customers — no matter which channel they’re using to bank.
“We’re already using AI to analyze underlying patterns in complex market environments, and we’re enhancing client security through biometrics and fraud detection algorithms,” he said.
Consumers want to access banking services online or on their phones, and they expect to do so without being put through a lengthy or complex authentication process. Fraudsters are becoming more sophisticated in how they target banks and consumers, though, meaning financial institutions (FIs) have been forced to step up their efforts to stop them.
As a result, RBC and other FIs are looking to learn more about their customers’ habits and preferences, including how they typically manage their money — or, more importantly, how they don’t. Banks can use this information to rapidly screen transactions, Wildberger explained, especially with AI and ML, and identify patterns that indicate bad actors are wreaking havoc on a person’s financial life. This can all be done without the consumer having to lift a finger, enter a password or perform any other identity verification measure.
“[RBC is] using AI and ML to better understand our clients, to derive new insights and to increase our effectiveness so that we can deliver personalized solutions tailored to our clients’ preferences,” he said.
The bank is also looking to further increase its use of the technologies, including neural networks. RBC is actively investing in research and development, opening the Toronto-based Borealis AI research lab in 2016 to accelerate the development of new use cases.
“RBC is aiming to push the boundaries of the science around machine learning,” Wildberger added. “We are researching and developing ways to address cybersecurity, fraud management and biometric authentication using AI. In fact, we’re continuing to innovate to enhance our capabilities and keep pace with the fast-changing threat landscape.”
Balancing Security With Simplified Experiences
Consumers care how financial firms are working to protect their money and safeguard sensitive information. Eighty percent of those surveyed recently told researchers they believe protecting personal data should be a “top concern” for their FIs.
However, consumers also crave convenience, even at the expense of security. Recent PYMNTS research found that 70.5 percent of those surveyed cited ease-of-use as the most important feature of an authentication process, while 63.6 percent noted convenience and 61.6 percent said speed. Just 44.6 percent considered stringent data security features to be the most important element, and 32 percent preferred high fraud protection levels.
As such, banks and other financial firms must work to offer stringent security — without sacrificing the convenience of customers’ experiences.
RBC forms profiles using data about customers’ habits and preferences to provide a safe and simple experience, Wildberger said. That data is then automatically checked against these profiles without slowing customers down or asking them to complete complicated identity checks. Transactions that do not match pre-established patterns and habits will be rejected or flagged for further review.
The company plans to work with both internal developers and corporate partners to find other use cases for emerging technologies going forward, allowing it to offer a combination of simplicity and security. RBC has invested nearly $4 million in AI and ML development partnerships with the Ben Gurion University’s Cyber Security Research Center in Israel.
“This funding will support the development of adversarial AI, including ML-based cyber mitigation techniques,” Wildberger explained.
FIs will likely continue to innovate and create new opportunities through technology, but it appears cybercriminals are remaining eager to develop their own sophisticated methods to take advantage of those same opportunities.