Financial Institutions (FIs) have undergone an evolution over the last few decades, transforming from providing services through brick-and-mortar locations to enabling transactions through full-on digital banking—including the emergence of open API banking, in which third parties access data from FIs to provide financial services. This demonstrates a true digital transformation of FIs, making them technology companies as much as financial institutions. And while the expansion into so many new channels has meant greater opportunities for customers to bank easily and conveniently, and for FIs to grow and prosper, it's also revealed new vulnerabilities for fraudsters to exploit.
You may remember when fraud protection was as simple as presenting an ID at the teller window or entering a PIN at an ATM. Today, though, the proliferation of banking channels has led to a proliferation of fraud prevention strategies and solutions—to the point where it's typical to have a different solution for every channel. That worked fine when there were just a couple of physical channels, but fraud management is much more of a challenge when banking channels have grown so much and so fast – in number and complexity.
It's one thing to be on the lookout for fake IDs at a bank branch, but quite another to roll out and manage a half-dozen different sophisticated technology solutions to identify and stop digital fraud (not to mention the expertise to use them). And yet that's exactly what's been happening, with every FI managing each channel it operates as an independent silo, with its own point solution for preventing fraud and its own team of dedicated fraud experts. It's expensive, inefficient and increasingly unsustainable.
Figure 1: Current FI View on Fraud
FI Evolution Sparks a Revolution: One Solution, No Matter How Many Channels
If multiple point solutions are making fraud prevention overly complex and hard to manage, the alternative is to stop thinking in terms of multiple solutions and views. Instead, FIs can step outside the box and move toward one holistic view of omnichannel fraud risk—a consolidated, streamlined view in which fraud data is correlated across a growing number of digital channels.
Figure 2: Single Omnichannel View
Attaining this view requires the ability to view, cross-reference and learn from data throughout the omnichannel environment. This represents a new approach to fraud management that's characterized by the following:
- A single omnichannel view means seeing multiple banking channels as a single, multi-faceted environment rather than as separate environments, and looking at one view of fraud risk across the omnichannel environment.
- Cross-channel correlation is essential to establishing a single omnichannel view. It means, for example, applying behavioral analytics across all channels to glean insights into customer behavior and correlate them across channels in a single view.
- Machine learning is the mechanism for cross-channel correlation that, over time, can establish a single view of the customer—a digital identity that transcends channels—and provide fraud protection for that digital identity.
FIs have come a long way from the days of one or two banking channels and, when it comes to fraud protection and prevention in the digital era, still have a long way to go. Fortunately, there's a path to managing fraud effectively, and it starts with recognizing that a multi-solution approach won't work in an omnichannel world.
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Learn about the top ten challenges FIs face in trying to manage fraud schemes across banking channels, in Overcoming the Top Ten Challenges to Omnichannel Fraud Management., a new report from RSA and Javelin Strategy & Research.