Study finds banks still struggling with early fraud detection

Tuesday, 06 June, 2023

Study finds banks still struggling with early fraud detection

A new study reveals that banks are challenged when it comes to effectively detecting fraud and money laundering campaigns before customers’ financial assets are adversely affected. The research comes from Forrester Consulting, on behalf of biometric intelligence company BioCatch, and reveals the reality of the world’s largest banks’ ability to effectively respond to the changing fraud and financial crime landscape. It comes on the heels of increasing media and regulatory body reports that money laundering scams are increasing at alarming rates.

The challenge to detect customer exposure creates significant financial, regulatory and reputational risks. In parallel, the research also shows that banks are also struggling to meet consumer demand for digital journeys that are simple, safe and secure.

The report is the result of responses from more than 150 financial institutions across Europe, North America and Latin America. It has uncovered the operational concerns and challenges of shifting to a digital-first banking business model while keeping customers protected from fraud and financial crime.

Key findings of the report include:

  • 78% of global financial institutions report they are concerned about their ability to respond to emerging fraud threats quickly and effectively.
  • Eight out of 10 financial institutions struggle to provide digital experiences that are both frictionless and secure.
  • 83% of banking leaders say the market environment demands that they keep up with best-in-class approaches for responding to financial crime.
  • 75% of financial institutions report that financial risk to the organisation increases significantly with each additional day of investigation into cases of financial crime.

The survey further reveals that financial institutions are aware of the need to detect financial crime early and integrate enterprise fraud management (EFM) and anti-money laundering (AML) capabilities. However, only 8% of reporting banking organisations have managed to fully integrate people, processes and tools across EFM and AML. Most surveyed decision-makers are implementing best practices like integrating explainable AI/machine learning (ML) risk-scoring models to ensure transparency in decision-making processes and to provide customers with a seamless experience and a safer digital journey.

The study finds that behavioural biometric intelligence can act as the critical link between EFM, AML and cyber teams, empowering them to work together leveraging unique data that defends against the most complex types of fraud such as social engineering scams. It is key for fraud teams to foster collaboration among stakeholders, including banks, regulatory bodies and law enforcement agencies. Financial institutions should leverage collective expertise and resources to adopt innovative FRAML (fraud and AML) solutions that effectively combat financial crimes while providing a better digital banking experience for consumers.

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