Founder Interview: Behavioral Analytics Makes the ROI Case for Banks’ Scam-Fighting Efforts

The fraudsters come in droves, inundating would-be victims across all manner of attack vectors, from phishing scams to bots. And in the process there’s a significant amount of information being thrown at banks and consumers across digital channels, said David Excell, founder of Featurespace, in an interview with PYMNTS.

“And we often don’t have a lot of time to look at a particular message. It becomes harder to understand of it’s a ‘real’ message or one that’s trying to deceive us,” he said as part of the “What’s Next in Payments” series titled “Business Simplicity: The New KPI.”

The challenge for banks is twofold: They want (and need) to offer end customers a seamless experience. While simplicity is the end goal, some individuals would like a bit of complexity and even friction in the mix when it comes to thwarting fraudsters. They’re comfortable with banks’ reaching out if they spot anomalous behavior to make sure that transactions will proceed according to the customers’ wishes.

The banks need some help in simplifying the complexities of battling bad actors. The company’s ARIC platform uses adaptive behavioral analytics to analyze customer behavioral data in a cloud-based environment, offloading some of the technical heavy lifting that would ordinarily be involved.

“We’re helping banks and financial institutions deal with complex problems,” Excell said, “as there are sophisticated criminals out there that commit fraud and financial crimes as they try to perpetuate scams against consumers.”

ROI of Anti-Fraud Efforts

Fighting fraud, he said, has a few elements that can be measured. First and foremost comes as the financial institutions (FIs) take stock of the total amount of fraud to which they’re exposed and how they can minimize the number of transactions that end up being fraudulent. FIs can also measure the impact of time and money saved when they don’t have to re-create accounts or reissue cards for customers’ services and products that have been compromised.

“There’s a level of complexity,” he said of Featurespace’s algorithms, “especially when we deploy artificial intelligence. There are elements around data, regulation and compliance.”

He noted that the company’s platform is “adaptable to the changes in fraud, so when new fraud emerges, there’s not a significant cost in terms of needing to go and remediate around that.”  Featurespace’s models, he said, are adaptive, and they “learn” in real time, to ensure that risk scoring remains effective and reflects the changes in how consumers are transacting while banks launch new products and services — and while fraudsters look to exploit vulnerabilities.

The enhanced data and algorithms, he said, enable those organizations to put the appropriate amount of friction in place to validate and verify transactions so that consumers can continue to transact with confidence and also the banks can continue to grow — especially as demand increases for real-time payments.

As he told PYMNTS, “Ultimately we want to make the services and products simple for our customers to use. So we deal with the complexity [of risk management and fraud defenses] and then make that available for our customers to use as easily and as freely as they want.”