If you aren’t already concerned about identity fraud in banking, you need to be. In the U.S. alone, losses from consumer scams lead to an annual loss of $2.7 billion. According to the latest J.D. Power data, 36% of all banking customers in the U.S. say they have experienced financial fraud in the past 12 months, including unauthorized credit or debit card usage, P2P scams, and more. It’s very likely that you or someone you know has been a victim of banking fraud. With more sophisticated scams emerging every day, identity fraud continues to be a growing problem.
Fortunately, there are actionable ways for banks to protect customers from identity fraud, as well as best practices for individuals to follow.
Definition of identity fraud detection in banking
Identity fraud in banking is the illegal and deceptive act of a bad actor stealing or fabricating personal information and using it to impersonate somebody else in financial matters. It’s a broad definition that can encompass a number of illegal activities, including but not limited to unauthorized access to financial accounts, unauthorized transactions, authorized payments under false pretenses, or setting up a deposit account such as a DDA, savings, or investment account.
Consequences of identity fraud in banking
Identity fraud can result in financial losses as well as non-financial consequences. For individual consumers, the financial consequences can entail the direct loss of savings and potential damage to their credit scores. For financial institutions, financial loss can come in the form of direct monetary losses, reputation loss, increased compliance costs, and increased costs for security, insurance, and legal and investigative fees, among other serious financial problems.
Non-financial losses can also be incurred as a result of identity fraud. These consequences are often linked to serious international crimes, such as human trafficking, drug trafficking, and financing terrorism.
Another activity that banks must be aware of is money muling. Money muling causes both financial and non-financial loss. This illegal act uses individuals to transfer illegally obtained funds between different bank accounts or countries. Frequently, these individuals are unaware that what they are doing is illegal because fraudsters often use complex social scams to deceive their victims into money muling.
If a bank seeks to defend against identity fraud, it must invest in identity fraud detection and prevention software. This is the process of using advanced technologies, data analytics, and authentication methods to identify and prevent fraudulent attempts to access accounts and money. Identity fraud detection and prevention software prevents fraud by verifying identities of new applicants, and monitoring and detecting fraudulent credit and debit services and transactions. The best identity fraud detection and prevention software maximizes revenue by auto-accepting more good applicants, stopping fraud, protecting brand reputation, and streamlining good users’ experiences.
The importance of advanced SaaS identity fraud detection and prevention software lies in its ability to efficiently and proactively safeguard financial institutions and their customers against the rising threat of identity fraud. By leveraging cutting-edge technologies, real-time data analysis, and machine learning and artificial intelligence algorithms, this software offers numerous benefits, including enhanced security, real-time monitoring, and multi-layered authentication.
The importance of identity fraud detection in banking
Fraudulent activities can lead to significant financial losses, not just for banks but also for their customers. Today, banking customers shoulder the financial burden of fraudulent authorized push payment fraud, often called consumer scams. The originating banks – normally on the hook for fraud liability – are currently not responsible when account holders are tricked into authorizing payments to a fraudster in a receiving bank.
However, since June 2022, there has been a push to move the losses linked to payment scams away from consumers and onto the banks and fintechs that hold the receiving depository account in a transaction. This means that your bank, as the receiving institution, could be liable for losses resulting from differing consumer scams and fraudulent transactions.
Leading financial institutions are aware of these impending liability shifts. For example, Zelle and its bank owners are taking a proactive approach by creating a playbook for refunding customers and each other for certain scam payments. With identity fraud detection and prevention software, banks can identify and mitigate fraudulent activities before they cause major losses.
How Socure helps protect against identity fraud in banking
Socure’s robust identity fraud detection and prevention software provides numerous features that help banks stop identity fraud before it causes damage. We offer powerful, intelligent solutions that target and eliminate different types of identity fraud to provide a wide spectrum of protection for your financial institution.
- Sigma Synthetic Fraud closes the front door to both fabricated and manipulated synthetic identities, before they infiltrate your portfolio.
- Portfolio Scrubs identify risky identities that exist in your portfolio and often serve as money mules.
- RiskScores for Address, Phone, and Emails, and Correlation Values can passively assess the risk of non-monetary changes and P2P credentials in real time.
By leveraging advanced anti-fraud software, banks can swiftly identify suspicious behaviors and transactions, enabling prompt action to stop fraud in its tracks.
To learn more about these cutting-edge solutions, schedule time with our team here.