How to stop fraud at the flip of a switch
Over the past few years, the fraud landscape has evolved, with no signs of fraudsters slowing down. In many ways, fraudsters have become the new startups. And these “fraud startups” have been emboldened by massive influxes of cash from pandemic relief fraud. Like any startup would do, they didn’t just take the money and run. They invested it in smarter people and better technology to execute more sophisticated fraud attacks.?
Many financial institutions overlook fraud losses as a cost of doing business, but fraud startups are out to disrupt the financial services industry — making it critical that banks and fintech companies develop a competitive strategy against them.?
So how do you beat these fraud startups?
There are two main types of fraud that our clients see. The first is “ambient fraud.” This is the fraud you’ll see on a consistent basis. It’s normal to see this type of fraud, and hopefully, your fraud prevention tools fight most of it off. The second type of fraud is a “fraud attack.” Fraud attacks occur when the ambient fraud identifies a vulnerability and shares the vulnerability with their network of fraudsters to join in on the fun.?
Fraud startups are raising the stakes for fraud attacks because they are faster and more efficient at exploiting a vulnerability than the fraudsters we’ve seen in the past. The slower you are to react to fraud attacks, the more they will exploit you.
It’s no longer enough to just react to fraud attacks after they happen; you need to start thinking like a future fraudster. Your fraud prevention technology architecture must allow for the flexibility to add stricter controls quickly. We like to think of it at Alloy as the ability to?move at the speed of fraud.?
Fraudsters catch you sleeping due to a false sense of security?
Despite the undeniable industry-wide fraud issue, some banks and fintech companies still say they aren’t seeing a lot of fraud right now. We’ll let you in on a little secret: that’s probably not true — or won’t be true for long.?
There are really only two reasons banks or fintech companies may say they don’t see a lot of fraud. The first is that they are pre-launch, or doing a friends and family launch — I hope you’re not seeing fraud during your friends and family launch… if you are, you may want to find some new friends!?
The other reason is more dangerous: they say their fraud controls are good enough for “right now.” What’s dangerous about this is that this sense of complacency will not set you up for the tricks that fraud startups will try tomorrow.
Inflexible technology and rigid org structure get in the way and actually provoke more fraud
Fraud startups poke before they attack. If your technology or organizational structure prevents you from reacting quickly, they’ll swarm you and exploit your vulnerabilities as much as possible.?
If you’re getting hit by a fraudster, you have a few different options depending on how your fraud prevention tools and processes are set up. Some organizations might need to enlist their engineering teams to change workflow rules or build out new 1:1 integrations with data partners. Oftentimes before organizations can make these changes, they need to get the changes approved by a long list of stakeholders. As you can imagine, between the dev work and the approval process, you can eat up valuable time during a?very?time-sensitive situation.?
Organizations with?Identity Risk Solutions?are starting out ahead of the pack. It’s easy for organizations with IDPs to make technical changes like workflow updates or adding data sources; they don’t even need to get their engineering team involved to make these changes.?
It’s not just about the technology, though. For many financial institutions, their organizational structure makes it hard to make decisions quickly. Ask yourself, who needs to approve changes to your fraud prevention processes? How quickly can you implement those changes? Fraudsters won’t wait around for you to get a new data source approved. Setting up a fraud attack response team that includes any decision-makers you’ll need approvals from ensures you’re able to make swift decisions and changes to keep up with bad actors.?
Flip the kill switch ??
You don’t want to get caught in a fraud attack and then have to scramble to figure out how to respond, build new workflows and integrate with new data providers. IDPs can help fight ambient fraud, but the best way to tackle a fraud attack is to put measures in place within your Identity Risk Solution that you can quickly turn on in the case that your ambient fraud turns into a full-blown fraud attack. Think of it as?kill switch.
Here are some things we suggest that you put in place proactively to stay ahead of your future fraudsters.?
Unfortunately, fraud is inevitable and getting more sophisticated each day. By implementing these extra layers of protection proactively in your?Identity Risk Solution, you can access them when you need them and save precious time when it counts.?
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