Battling financial fraud in the new age of payments services

By | 4 minute read | December 10, 2020

The arrival of COVID-19 has inspired new opportunities for the unscrupulous. According to the United States Federal Trade Commission, approximately 770,000 fraud claims accounting for USD922 million in losses were filed between January and June 2020 – a 13% increase compared to the same six-month period in 2019. New financial solutions in the United States and Australia like real-time payments (RTP) are among the most attractive targets for scams and other unlawful activities.

For some organizations, the suspected sources of COVID-19 related fraud are cause for alarm. In the COVID-19: KPMG Fraud Survey, published by KPMG Australia in April 2020, 83% of participating executives believed their organizations were vulnerable to fraud taking place in distributed working environments. Nearly 67% found employees and suppliers among their most significant fraud threats.

How do companies and organizations strengthen their efforts to battle fraud? For companies in the financial payments services sector, the combination of AI and highly skilled talent are strategic weapons.

In a recent conversation, Derek Weatherley, CEO, Indue Ltd., and Constantin von Altrock, Director, CTO Safer Payments, Financial Crimes Insights at IBM, discussed the importance of empowering employees to use AI and machine learning to detect and prevent fraud and financial crime.

Watch a 0:36 summary above of a leadership conversation with Indue, Ltd and IBM, and watch a video of the full conversation (23:34) here.

The emergence of COVID-19 has accelerated necessary change to the payments processing ecosystem, speeding the digitalization of business and commerce worldwide. So it should come as no surprise that real-time payments processing has amplified existing fraud-prevention challenges. The proliferation of new payment options has brought people into e-commerce who had little or no experience with it. “People who previously preferred to stay out of e-commerce now feel it is the safe way to conduct commerce to purchase things they need,” says Constantin von Altrock. “It’s a wonderful opportunity for criminals. A lot of people that are inexperienced in how to conduct e-commerce are now coming to the marketplace and criminals are having quite a good time defrauding those people.” And fraud isn’t limited to commercial enterprises; altruistic individuals are targeted by bogus charities using person-to-person money exchange services applications.

For Derek Weatherley, CEO of Indue Ltd, personal and organization payments fraud is unconscionable. Indue partners with leading payment technology and service providers to provide new payments platforms, mobile payments, and a full range of payments and card platform solutions as well as functioning as a disruptive force for fraud prevention through its Orion Financial Crimes Service. For nearly two decades, Weatherley’s team at Indue have waged a fervent battle to thwart payments and financial fraud in the Australian financial payments sector. He augments his strategic role at Indue, by active involvement in industry associations including the Australian Payments Network, which works to define and establish best practices for the payments industry including the mitigation of financial crimes in Australia. AI is a critical component in his arsenal.

Embarking on the AI journey

Indue brings a force-multiplier to fighting financial fraud by combining two superior forces: human knowhow and AI. “Technology is limited to the extent that people are able to drive it,” Weatherley explains. “Our biggest learning, as we embraced the AI journey, is that everybody across the business needed to grow with AI. It’s great to have sophisticated technology in the shop but being able to demonstrate how that technology drives a valued business outcome really helped our broader team embrace AI.” Weatherley’s innovative approach reshaped employee roles and opportunities at Indue.

AI provides a path for growth

While many believe that AI eliminates jobs, Indue uses AI to help employees grow their careers. Many individuals, especially those in non-technical roles, learned highly valued AI-powered analytical skills. “With these additional proficiencies our team members have experienced a quicker career trajectory,” Weatherley says. “People have grown quickly from junior to senior analysts without the need for deep technical or coding skills.” The track for professional growth has increased employee satisfaction. And in an era of AI talent and skills shortages, Indue has frequently found or developed AI professional skills within its own ranks, minimizing the need to search for skills outside the company.

Why broad business understanding works

AI solutions help Indue professionals reduce the time and effort they spend looking for problems so they can devote precious attention to solving them. The combination of human know-how and AI helps Indue clients mitigate fraud. “AI provides much of our fraud prevention capabilities,” says Weatherley. “AI focuses on the micro level, monitoring for fraud and fraud patterns. Our analyst team is freed from the minutiae, allowing them to spend their time analyzing the more complex macro trends of payment fraud prevention.”

The IBM® Safer Payments solution allows the analyst team at Indue to address emerging threats and detect fraud with greater speed and accuracy. Its analytics and simulation tools help the team continuously monitor business performance and adapt the company’s decision model to emerging and modified fraud patterns.

Mapping out the journey

Traditional approaches to fraud prevention tended to focus on transactional information. “As you embark on a fraud prevention strategy, begin with the end in mind, set focus on data you need, ingest it quickly,” says Weatherley. “Fraud is a moving feast in a connected world.”

Overcome obstacles to AI adoption

An IBM commissioned study conducted by Forrester Consulting found that firms consider AI initiatives a top priority in digital transformation and a driver of important business outcomes, but talent shortages, inefficient data management and governance, plus distrust in AI, inhibited adoption significantly.

To learn more, download the thought leadership paper Overcome Obstacles To Get To AI At Scale, for perspectives and strategies to help advance your journey to AI.

Using new cognitive technology, payment fraud professionals can now develop custom models that outperform existing fraud prevention methods. See how IBM Safer Payments counters payment fraud by rethinking detection.

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