What's The Reason Behind Lesser Banking Frauds?
Banking frauds and financial crimes are growing substantially in their nature and complexity as we continue to evolve into an ever more connected world. However, experts at a recent event point out technology-related banking and financial frauds have been arrested to a large extent. “The number of cases has been coming down gradually,” Ranjana Kumar, Chairperson of the reconstituted Advisory Board on Bank, Commercial and Financial Frauds. So, what could be the reason/s behind the reduced numbers?
Experts believe, on one hand, factors such as increased level of awareness among customers and stronger technical teams have played a role in curbing frauds, on the other and what acted as a trigger are the increased use of advanced tools such as big data and analytics in banks and financial companies that has helped in reducing the cases significantly.
While this can be reason enough for banking professionals to cheer, in reality, they cannot afford to be complacent, states banking evangelist Paul Clandillon. That’s because fraud and financial crime are growing substantially in an ever more connected world. “The spread of mobile devices, have opened up different avenues of attack for technically sophisticated and well organised gangs of fraudsters and criminals,” he states.
The fraud detection and prevention market is expected to grow from $8.87 billion in 2014 to $20.49 billion by 2019 at a Compound Annual Growth Rate (CAGR) of 18.2% globally from 2014 to 2019.
Fortunately, developments in the areas of big data, analytics, unstructured data analysis and case management provide a platform to address these new threats. Re-evaluating organisational constructs and adopting new ways of thinking will also be required in order to take advantage of these developments, and contain the threat of financial crime.
According to Gaurav Vohra, CEO, Jigsaw Academy, “With the banking sector increasingly reliant on analytics to reduce their liabilities due tofraud, the demand for data scientists in the banking sector is huge.” He quoted the Jigsaw academy’s 2014 Analytics Salary Report, where the banking industry is willing to pay higher salaries to tempt analytic professionals into joining them. One of the reasons the bankingsector is willing to pay higher salaries to data scientists is because these companies are more easily able to measure the impact of their analytic initiatives(for example a reduction in fraud saves banks huge sums of money every year).
The report says that since financial institutions know the value that analytics brings to their business, they confidently invest more in analytics and are happy to pay higher salaries to retain their analytics talent, says Vohra.
Explaining how big data analytics can help banks combat fraud at the application level, Mohan Jayaraman, MD, Experian Credit Information Company ofIndia and Country Manager, Experian India says, “Continuous threat that financial service providers grapple with is fraudulent applications. The most effective strategy is to prevent the fraud at the point of application. This requires the authentication of genuine customers and the detection of potentially fraudulentapplications before the customer is underwritten without adversely affecting customer service level and speed of decision making.”
Banks and financial companies that are able to adopt a proactive response to fraud will have a real competitive advantage in the market, says Jayaraman. Taking a holistic approach to fraud, combined with a strong cybersecurity strategy and appropriate process controls, will ensure that a financial institution has a robust defense against the most difficult fraud attacks it may encounter.
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