Fraud Detection

In real time. Right now.

by Ian Manocha

Fraud migration – today's challenge for banks.

In a 24/7, online world, consumers can access a full range of financial products and banking services through a variety of channels, from the traditional branch infrastructure through to telephone banking, ATMs, Internet and third-party networks. Complex products – such as offsetting accounts through which debit card and check access can be provided to mortgage and other lending facilities – provide benefits and convenience to customers, but impose greater risk if compromised by criminals. Perhaps unsurprisingly, the nature of bank fraud has evolved alongside these changes.

Technology has enabled sophisticated fraud schemes to work independent of artificial barriers, such as product, channel or geography, requiring a truly holistic approach to combating fraud.

Introduction of improved security on payment instruments, such as "chip and pin" technology cards, will also shift the attention of criminals to focus on weaker institutions, channels and products. And there is a general move from attempts to compromise the payment instruments to identity-related fraud, or compromising of employees, or the placement of their own people inside financial institutions in order to gain access to information.

Financial organizations have realized that yesterday's fraud management techniques are insufficient to combat a new generation of fraud.

A customer-centric approach
An enterprise approach is required to ensure that fraud prevention, detection and management take place in a system that looks at multiple sources of fraud across multiple channels and regions. The goal is to build a customer picture with transactions rolling up into account views, and then account views rolling up into a customer view so that the best decision is made for both the customer and the bank.

Good fraud management, therefore, relies upon accurate, timely and relevant data and information. The deployment of common and integrated fraud databases, fraud detection, and case management tools aggregate and provide the workflow tool for all cases across the organization. Events and losses need to be captured, viewed and analyzed against multiple dimensions (e.g., geography, customer, product, channel, fraud type, fraud subtypes). This flexibility also provides a robust capability for data analysis and mining for unknown trends.

A real-time approach to fraud detection
While many fraud detection systems on the market employ reactive "after-the-fact" analysis of questionable transactions, this sort of fraud detection comes too late to give financial organizations any real protection from loss.

For plastic card transactions, for example, it is critical to detect fraud at the point of sale using real-time scoring in order to authorize, refer or decline the transaction. These fraud detection solutions, therefore, become a critical part of a card issuer's operational infrastructure. Channels that process these transactions are siloed, so you can't get a good view of your customers across the enterprise. SAS gives banks the ability to manage card fraud from a customer-centric approach, across the various consumer business lines such as credit, debit, corporate or retail cards, all on a single, enterprise intelligence platform. This integration leads to a greater visibility into the genetics of fraud associated with product portfolios, channels, operations, etc., – all resulting in the reduction of fraud losses and false alerts and the improvement of customer satisfaction.

For banks and their customers, a few seconds after the criminal has succeeded and walked away are a few seconds too late. The speed at which SAS can analyze each transaction is as important as the accuracy of the results. That is why HSBC, one of the world's largest banking and financial services organizations, has chosen to partner with SAS to implement a new generation of payment card fraud management across its global card portfolio.

HSBC will be rolling out the enterprisewide fraud solution in all of its key markets, and it will become its key defense in the fight against credit card and debit card fraud.

The major benefit for HSBC will be the significant reduction in fraud-related losses, while also lowering the overall cost of fighting fraud by having a common platform operating in all of its markets. By handling fraud in a faster, cleaner and more effective way, HSBC will be able to provide even better service to its customers because this approach is inherently customer-centric. Customers shouldn't have to experience any interruption of legitimate transactions; they will only realize the benefits of preventing those activities which are fraudulent. In addition to happier customers and earning the reputation of providing the most secure card in the world, HSBC's shareholders are likely to find the measurable results to be very pleasing indeed!

Bio: Ian Manocha is general manager of financial services for SAS EMEA and also the director of the Worldwide Real-Time Fraud Practice for SAS.