Galvanising the Fraud Prevention Ecosystem.

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? Galvanising The Fraud Prevention Ecosystem

1. Background & Landscape – All FI’s/Banks globally are now challenged/tasked with the rapidly changing sophisticated Fraud Trends like Scams/APP Fraud.

Digitisation and the Pandemic have only caused Fraud to propel/grow at faster levels than ever. The underlying Payment Rails of Faster Payments/Zel Payments have been exploited to aid Fraud. The classic Fraud Frameworks fail to detect the trends where the Fraudster now is the Customer himself/herself.

2. Current Scenario ??- While APP/Unauthorised Fraud via Scams has increased the other Fraud Types haven’t really subsided/reduced – Application Fraud still continues to grow. ?The onboarding journeys are being made simpler / shorter with an aim to have the minimum clicks. However, what is happening is that with each simplification of the Customer Journey – there lies a potential trade off – or a new avenue/crack created for Fraudsters to exploit.

3. How Do We Solve for this Scenario? - So, what can really control the rising Fraud Trends/Losses – is it banks or FI’s deploying the right technology solutions, is it the Regulators clamping down hard with legislations, is it the Customers sharing the impact OR is it actually galvanising the entire Fraud Eco-system?

I believe every player in the Ecosystem has to come together/contribute/deliver to achieve some concrete results. The Regulators play a very important role/are the nucleus of this Ecosystem who can drive change, govern the players and help protect the customers/consumers.

Each Player in the Ecosystem needs to do a little more than they are required to do – only then will we have a grip on the problem. Combined Actions/Taskforces will achieve results which are faster but also critically which are more strategic in nature.

1- Regulators

1.1- Enable the Banks/FI’s by providing well defined Frameworks to follow. Classic example is APP Fraud where the banks are losing a significant amount of money even after conducting some level of due diligence. Providing the banks with a clearly defined framework to follow will help the Banks follow a structured approach of due diligence.

1.2- Create teeth/power for the Industry Bodies by mandating them on specific issues. Regulators shouldn’t not only encourage/support but also in some way mandate Industry Bodies to achieve their objectives by monitoring/governing participation.

1.3 – Bringing it all together from all the Players in the Ecosystem – Important for them to draw in information even from 3rd party sources like the bureaus, Fraud Databases and even Fraud Solution Providers. The more the length and breadth of information you have, the more control you will have in controlling/solutioning the problem. Structured Governing Forums with Clear Objectives/Mandates will help achieve momentum. Encouraging the Members/Partners for engaging and sharing can help.

1.4 - Sharing Intelligence with the Ecosystem - FI’s/Banks individually would never share be comfortable their Loss Data however what could help is for the Regulators to establish some basic standards and mandate all FI's to share which helps it (Regulator) have a deeper insight into the problem. ?This information can be then developed into Fraud Patterns and shared with all the Banks/FI’s.

1.5- Widen the scope of work to achieve results – for example if there is Telecom Sector engagement – then work to create and define their roles. Not easy but can/should be explored.

2- FI’s/Banks

2.1 – FI’s/Banks should invest in the right Fraud Technologies/Capabilities – they also need to deploy them on all the channels including Mobile (which is increasingly used now)

2.2 - They need a Multi- layered Fraud Framework to reduce Fraud – balance of internal and also external Fraud Detection Tools especially if their home-grown tools aren’t enough.

2.2 - Understand the Architecture deep enough to get the best ROI – Knowing where to deploy in the Customer Journey.

2.3 - Make the Framework Robust flexible enough to even cater to changing Fraud Typologies/MO’s – critical step for the controls to stay relevant across typologies/MOs.

2.4 – Understanding Normalised Customer Behaviour is extremely important to catch sophisticated trends.

2.5 - Realise the need for having Enterprise Level Controls (which cut across Products & Functions) for instituting a robust framework. (Relevant especially for large organisations)

3- Customers need to take some Onus - At some stage, the Customers would also need to assist in reducing Fraud. The Regulators will have to look at legislations to increase the onus on the Customers as well. ?We see the FI’s focussing a lot on increasing Customer Awareness on Scams and Frauds but they will only do so much. Effective mitigation strategy would also require the Customer to engage effectively with their respective FI's/Banks.

3.1 – Engage with the Banks/FI’s- Taking Out the time to report Fraud / To Confirm Transactions/ To participate in Workshops & provide insights.

3.2 – Comply with directions and education from the Banks.

3.3 - Customer should be ready to pay some fines/penalty for repeated neglect of responsibilities after they have ignored Bank/FI warnings.

4- Other Parties - Bureaus/Fraud Databases/Payment Bodies -

4.1 - Bureaus/Fraud Databases can play a very beneficial role by at least sharing Fraud Trends across FI’s/Sectors.

4.2 – Industry bodies like the NPSO can play a critical role in providing Payment Data for Faster Payments – controls can be developed.