The fight against fraud is daily in financial services companies. Each day, the media shows new and surprising cases. As criminals become more sophisticated, banks must also do the same. And artificial intelligence (AI) is a resource to be considered in the context of digital transformation.
This form of technology works both ways. Criminals can use it to gain access to user accounts and profiles, but they must be tackled to stop such actions. Then, financial institutions can also benefit from AI to reinforce security against suspicious movements in the accounts.
But how exactly does artificial intelligence help the financial market to fight crime? Find out below!
How important is AI?
Cupid Chan former CTO of Index Analytics and currently the Managing Partner of 4C Decision says that fraud can be of many ways. He says that one way of fraud is that a database can be hacked, and the data of customers can be sold in the black market where this data can be used by an identity thief to conduct a fraud. This type of fraud can cause about $1.7 Billion a year. He further says that “If your credit card details are exposed, and someone conducts a transaction, so this kind of credit card fraud can cause a loss of more than $25Billion a year. And last but not the least, healthcare fraud can cause a loss about $68Billion a year.”
Artificial intelligence can be an interesting tool to fight fraud, phishing, money laundering and other suspicious movements. It contributes to increasing the segmentation of customers, providing more quality to the data to understand how the user behaves.
Once the system itself can identify a non-standard movement, artificial intelligence automatically works to combat undue actions, protecting accounts and registrations. This context is very favorable to prevent scams by social engineering, for example.
AI, then, acts in the financial system from the analysis of transactions and standard behaviors to identify fraud in an operation, process failures, financial losses and more. By identifying suspicious actions in seconds, it contributes to improving the users’ experience at the financial institution, avoiding the need to block cards and change passwords.
How does artificial intelligence use machine learning to identify fraud?
If AI manages to have a predictive movement against thefts and fraud in financial services, it is because machine learning (ML) provides the learning capacity for the system. The analysis and processing of user interactions can only be defined because ML acts to understand the behavior.
When there is an action that deviates from the patterns identified by the users, the system can identify what is happening. So, the technology uses previously acquired knowledge about account data to promote greater security for bank customers.
From the threat context, the machine can disable a criminal action and prevent fraud in real-time, quickly. The system needs to have the intelligence to act immediately in the face of attacks, to prevent attackers from succeeding in their goals. This is because the block has a short time to be carried out.
Another advantage is that it becomes easier to identify criminals since it is easier to locate the access point from where the criminals access the data.
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