Technology is often described as a double-edged sword, a metaphor that is most fitting when discussing the issue of fraud.
With fraud levels at an all-time high and losses on a par with the UK’s annual defence budget, banks are increasingly turning to technology solutions as a way of fighting back against fraudsters.
Unfortunately, digitally-savvy scammers are equally invested in tech and are constantly finding new and innovative ways of defrauding banking customers.
This means that the development and deployment of tech often results in a cat and mouse game between fraudsters and banks.
Much like the classic Tom and Jerry cartoon where both sides are forever attempting to outwit each other, fraudsters try to stay two steps ahead of the banks and the enforcement agencies, while the banks and enforcement agencies must then identify new solutions to prevent emerging fraud.
Of course, while tech is undoubtedly a significant contributing factor, it is clear – from Firstsource’s vantage point as a fraud prevention partner to a number of the UK’s leading banks – that there are many issues to consider when it comes to the rise of fraud within financial services.
The factors fuelling fraud
Fraud is constantly evolving and tracing the causes behind this is no easy task. It is often the case that macro factors can play a significant part in shaping trends.
The ongoing cost of living crisis is taking its toll on households across the UK and fraud is an unwelcome by-product. According to a survey by Citizens Advice, more than 40 million people were targeted by scammers in 2022, with banking customers accounting for 27% of that total.
Meanwhile, a reduction in human-to-human interaction caused by the Covid-19 pandemic has opened the door for fraudsters to take advantage of certain vulnerable banking customers. During the lockdown, bank branches were shut and customers had to rely on digital methods such as telephony. This created an opportunity for fraudsters.
However, responsibility not only lies with the banks, who typically have good controls in place, but with global tech companies as they are often the ones who are leaking data. This has not yet been constrained by the legislators and regulators but there’s no doubt it’s on the agenda.
Legislation and collaboration are key to customer protection
One important area that will soon be covered by new legislation is that of customer protection. From next year, banks will be required to reimburse victims of fraud over and above the £85,000 limit provided by the Financial Services Compensation Scheme (FSCS).
Last May, the UK government passed legislation stating that banks need to educate their customers on how to avoid falling prey to fraudsters. It also states that it is the banks’ responsibility to pay back all the money that customers have lost.
Cross-industry collaboration is vital in terms of the fight against fraud but there is also an emphasis on individual banks to implement watertight processes and controls to ensure their customers don’t fall victim to fraud.
Banks have said they will identify the patterns for fraud, share data across the wider industry, and put strong controls in place. There are some banks who do this diligently but others, who may have implemented the controls, but are still very weak in terms of managing those controls.
Banks need help in the fight against fraud
Tackling fraud is a complicated and time-consuming objective and so it is hardly surprising that banks often look to external support in the form of business process outsourcing (BPO) partners.
From our anti-fraud centre of excellence in Middlesbrough, Firstsource provides comprehensive support around application push payments (APP) and plastics fraud to two of the UK’s ‘big six’ banks.
A team of around 150 onshore financial crime specialists are trained to identify and prevent a range of fraudulent activity.
Through a combination of optimising our strategy and approach to align with customer journeys, harnessing technology, and sourcing the best talent, we have delivered a 62% reduction in losses for banking clients.
The Firstsource anti-fraud proposition revolves around a human-centric approach that is underpinned by technology.
We are from the millennial generation but there are still people who prefer to have that human touch. When the branches are closed and they don’t have anybody to talk to, if an incident occurs, they need somebody at least on the phone to talk to and to understand why something has happened.
This is why the front-end aspect of providing the human-centric service is critical but it doesn’t mean it needs to be universal, it needs to be customised, which is where the technology comes into play.
A solid understanding of both tech and fraud is key
As fraudsters become ever more sophisticated in their tactics, banks will inevitably rely on BPO partners with a strong grasp of the latest trends, both in terms of fraud and technology.
To give a personal example, I do most of my banking on my mobile. There are certain patterns that my bank captures in terms of my usage of my smart device. For instance, do I always swipe from right to left or left to right? When I touch the screen, do I touch the screen with ‘X’ amount of pressure or ‘Y’ amount of pressure?
These points are classified under behavioural biometrics and they are captured by certain technologies. At Firstsource, we partner with banks that are using these technologies to create individual profiles of every customer for any high-value transactions in case these behavioural biometrics don’t match. If that is the case, we can stop any particular transaction, which will trigger an alert that will need to be investigated.
By working with our banking partners in such a way, Firstsource has been able to halve the average speed of answer and ensure that 100% of suspected scams are escalated within an hour – giving our clients and the end customer the best possible foundation for winning the fight against fraud.
