How Intelligent Friction Trips Up The Fraudsters

“The criminals are always opportunistic.”

Featurespace Senior Vice President of Global Product Management Dena Hamilton told PYMNTS that the scams are proliferating and mushrooming across a variety of vectors.

The conversation came amid surges in phishing, smishing and business email compromise (BEC) scams. In some cases, bad actors have been preying on tragedies, such as the condo collapse in Florida, and natural disasters, scamming unwitting, altruistic individuals and firms out of their donations.

The best defense rests with speed, automation and technologies that use behavioral analytics to spot and prevent scams that threaten to disrupt the payments landscape, she said.

Speed is critical, as criminals are getting ever faster, and the response window for gauging good customers and pinpointing riskier activities is narrowing, especially with the continued adoption of instant payments, she said.

Each financial institution (FI) has its own threshold, but that’s a very critical component, she said, adding the biggest concern is in the optimal balance between providing the most protection and the least amount of friction for the customers’ purchase experience.

Never-Ending Battle

The battle against the fraudsters and the FIs is an eternal one, it seems.

To get a sense of just how pervasive the attacks have become, Hamilton offered up a litany of statistics. Scams that leverage email conduits are up 109 percent through the pandemic. Traditional, phone-based scams have grown by 66 percent.

There are regional trends, too, she said. Authorized push payment fraud has grown in the U.K. over the past year, as banks have said that customers have lost hundreds of millions of pounds to those schemes. Social engineering schemes, the majority of which are carried out on mobile devices, are gaining ground, too.

There will be another vector to emerge as an avenue of vulnerability, one ripe for debate over ethics. Hamilton pointed to the continuing emergence of digital identities — for vaccine passports and other offerings — as a key area of interest for fraudsters.

“From a digital ID standpoint, I think we can all agree that authentication in general is forever going to be an issue for all of us,” she said. “How that authentication occurs; what we’re going to do; how and what types of digital IDs that our financial institutions and different landscapes are going to use or require [— will be issues]. And it may create another playground for criminal activity.”

Automated Deep Behavioral Networks

She said that advanced technology, such as Featurespace’s Automated Deep Behavioral Networks, introduces deep learning for card and payments fraud. This new technology enables FIs to prevent fraud with algorithms that take relevant information from a customer’s previous actions into consideration when determining if the latest action is fraudulent or genuine.

Upon introducing the invention earlier this year, the company said it can recognize legitimate customers while automatically detecting scams, account takeovers (ATOs) and card and payment fraud attacks, safeguarding low-value, high-volume transactions and boosting the security surrounding high-value transactions.

Thus, with the aid of deep learning and detection, it becomes easier to identify anomalous behavior on the part of that individual, which can alert the bank that a fraudster is impersonating a legitimate user without introducing new or heightened levels of friction into the process.

“FIs can trust that their  [fraud and risk prevention] systems are making good decisions rendered in milliseconds,” she said.