CAN TECHNICAL INNOVATION HELP FINANCIAL SERVICES FIGHT BACK AGAINST FINANCIAL CRIME?

By Charlie Roberts, Head of Business Development, UK, Ireland & EU at IDnow

 

It’s no secret that the financial services sector is a top target among cyber criminals. In fact, according to a report from IBM, it retained its top spot as the most targeted sector in 2019.

The consequences of falling victim to an attack can be severe too. It can lead to financial losses and reputational damage as well as loss of customer confidence and therefore sales. One UK financial services firm, for example, was hit by a total loss of $87.9 million.

So, if we consider that the coronavirus crisis continues to drive increased online consumer activity, should financial services be more concerned? Simply put, yes.

We are seeing a significant increase in organisations taking their business online to reach their customers. Banks, for example, in adapting to COVID-19, are offering customers a more convenient way of opening an account given branch visiting restrictions. But while these services offer more choice and ease for customers, it also means that new account fraud is opening up and is becoming a major challenge for organisations to overcome.

Charlie Roberts

Some cyber criminals are even trying to exploit the pandemic as an opportunity for financial crime by posing as trusted organisations like banks and even the World Health Organisation. According to Action Fraud, over £6.2 million has reportedly been lost by UK citizens to coronavirus-related scams. And this figure continues to rise week by week.

 

The role of innovation

The rise in financial crime shows just how much the financial services sector is in need of technological innovation. We’ve already seen great progress. About half of financial services and insurance firms globally already use Artificial Intelligence (AI), according to Forrester.

It has many use cases too. In a recent report published by The Alan Turing Institute, AI is largely being used for fraud detection and compliance. AI is beneficial because its algorithms can analyse millions of data points to detect fraudulent transactions which could otherwise go unnoticed by humans. What’s more, these AI-driven fraud detection systems can now actively learn and calibrate in response to new potential (or real) security threats.

The report also details some of the ways that financial services companies are exploring AI-based fraud prevention alternatives. It includes the use of AI to increase approvals for genuine transactions and the use of real-time and high volume data to help protect schemes, financial institutions and their customers from fraud and financial crime.

It’s perhaps no wonder that, outside of the technology sector, the financial services industry is the biggest spender on AI services according to The Bank of the Future report from Citi. But there is still some way to go in using technology to combat financial crime.

 

The identity verification era

Arguably, identity verification is one of the most important processes that technology can help transform – especially as the current crisis continues to drive increased online customer behaviour. In fact, AI and video based identity verification software can provide financial services organisations with a fast, seamless and secure onboarding process that increases conversion rates and customer satisfaction while providing the highest level of security.

Demand for this software in the UK’s financial services sector has already more than doubled since the start of the year, as growth in scams linked to COVID-19 continue to rise.

It’s this technology that will become critical in validating a person’s identity quickly and confidently while limiting the increased risk of fraud for both businesses and consumers.

IDnow’s AutoIdent is one software solution that has this year been experiencing high demand from the financial services industry. Its AI technology can use the camera on a customer’s smartphone to recognise the country and type of ID document without the need for user input. The technology then captures the machine-readable part of the ID document as well as non-machine-readable areas, such as address fields, before automatically checking the optical security features of the ID documents, such as holograms.

With the subsequent biometric video check of the person and “liveness detection”, the identification process is completed for the customer within just a few steps. The system can then decide if the identification is valid, with a reliability that meets compliance requirements.

 

Fighting back

The threat of financial crime is not going away any time soon and so there is no better way than to fight back with innovation. With the right technology investment, such as in AI identity products, the sector will be in a stronger position to support businesses who have a duty of care to protect their customers from risk of fraud while ensuring they remain resilient during this pandemic.

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