5 Strategies to Prevent Digital Fraud in 2023
In the dynamic banking environment of 2023, digital transactions are on the rise, following the trends of the past three years. But as transactions on digital channels are on the rise, so are attempts to defraud them.
According to TransUnion’s report “State of Omnichannel Fraud” in 2023, these attempts increased by 80% globally in 2022. The main target? Credit cards. The total percentage of suspected credit card fraud transactions grew by 76% worldwide since the start of the health crisis caused by the COVID-19 pandemic.
Thanks to the evolution of technology, identity verification processes are introducing new elements as additional layers of security, such as fingerprint reading and voice or face recognition, in addition to the familiar OTP (One Time Password). Read on for an in-depth look at six innovative ways to tackle the growing threat of digital fraud.
Best ways to improve your fraud prevention and detection system
1. Integrate biometric technology
One of the best ways to prevent digital fraud in 2023 involves verifying the identity of bank customers using biometric technology, which not only improves security but also minimizes the chances of creating synthetic identities.
Biometric technology can be integrated into any existing application the bank has, and analyzes each person’s unique and unrepeatable physical traits to identify them. Today, the most common method is facial recognition, which is done using the front camera of mobile devices. However, this may not be enough: in addition to validating the user’s identity, it is also important to carry out an active or passive liveness test as an anti-spoofing method.
This way, the company ensures that customers are who they say they are when opening a bank account, contracting an additional service, taking out a credit or debit card, or any other operation that the bank determines.
2. Fraud prevention and detection using machine learning
The second point to take into account is the implementation of a machine learning solution with the ability to detect and prevent fraud. Machine learning is the use of Artificial Intelligence (AI) to improve a system, based on the learning that the system itself makes from the operations performed by the user.
This technology makes it possible, for example, to create a profile of each user to identify unusual patterns of behavior and potentially suspicious transactions. The effectiveness of such tools lies in their ability to continuously learn based on a set of static and dynamic rules chosen by the bank.
As a result, a very important layer of security is added in two aspects related to digital fraud: prevention and detection.
3. Educate your customers
Avoid fraud by promoting a secure experience for your customers: this is useful not only for them, but also for the business. It is important to make sure that users have the information and tools they need to make the best decisions, take care of their personal data and detect potential security threats.
These are some of the things you should suggest to your customers:
- Use strong passwords. Encourage your customers to create unique, strong passwords and use MFA whenever possible.
- Recognise phishing. Teach your service users to identify and report phishing or social engineering messages that attempt to extract sensitive information. Let them know how your company communicates with them.
- Privacy protection. Educate your customers about the importance of protecting their personal information and how your business treats data in compliance with relevant regulations.
- Monitor their activity. Remind your customers to monitor their account activity to detect unauthorized transactions or unwanted modifications to their personal data.
4. Regular system monitoring and updates
Regular audits and updates of the systems and technology layers implemented are important for business continuity. It allows you to identify potential vulnerabilities and to always be at the forefront of security standards as well as best practices.
In terms of security updates and audits, some points to assess are:
- Vulnerability scanning. Scanning and testing the system that users use to connect to the bank, as well as the infrastructure of its servers, looking for weaknesses and configurations that can be exploited by cybercriminals.
- Penetration test. Also known as ethical hacking, this test requires a group of cybersecurity specialists to simulate real-world attacks to analyze the effectiveness of security measures, and identify which areas need improvement.
- Review security policies. Studying and updating security policies and procedures helps businesses adapt and ensures that all employees are aware of their roles and responsibilities in maintaining a secure environment.
- Analysis of external providers. It is common to incorporate, for example, technology from a third party to perform a specific task in a mobile application. The provider of this technology may introduce potential vulnerabilities into the bank’s system, so it is crucial to assess the security measures they implement in their own systems.
5. Data security and regulatory compliance
In addition to the above, data stored in the system must be protected with robust security measures. Whether with encryption techniques, firewalls or anti-virus software, preventing unauthorised access is paramount.
Today, there are rules and regulations that must be respected with regard to the storage of digital information. The General Data Protection Regulation (GDPR) is one of the most important, which establishes, among other things, how personal data must be processed and protected, and the conditions that must be met for it to be considered lawful processing.
The company must follow best practices for the secure storage, transmission and disposal of personal information.