Author: Alix Melchy, Jumio VP of AI
The banking industry is in an accelerating arms race against fraud. Regional banks, with their wide-ranging networks and technological capabilities, are prime targets for fraudsters seeking to exploit vulnerabilities in online banking systems.
The reported value of fraud in the UK surged to £2.3 billion in 2023, according to BDO’s FraudTrack Report, more than double the previous year. This spike can be chalked up to a rise in online scams, phishing attempts, and Authorised Push Payment (APP) fraud – where victims are duped into transferring money to fraudsters. Deepfakes and voice cloning have become easier to generate and more difficult to detect. Schemes in which scammers pretend to be anyone from a prospective romantic partner to a family member in crisis, or even more recently your boss, have the potential to target far more people and with a higher rate of success.
As financial transactions increasingly migrate to digital platforms, the risk of cybercrime, fraud, and identity theft grows, posing a constant threat to the integrity of a bank’s operations. It’s imperative banks build and bolster their defences against this evolving threat.
The currency of consumer trust
Trust is the bedrock of the banking industry. Without it, the relationship between banks and their consumers completely deteriorates. Consumers today have high expectations when it comes to fraud protection. They rely on their banks to do the heavy lifting in safeguarding their financial assets. If consumers feel that their bank cannot protect them from sophisticated fraud, 3 out of 4 will turn to others who can. It’s not just about providing basic security measures; banks must stay ahead of emerging threats to meet these high expectations and maintain consumer trust.
However, the damage caused by a loss of consumer trust goes beyond the financial. It can crater a bank’s reputation and result in long-term consumer retention problems. Moreover, rebuilding trust once it’s lost is a costly uphill climb. So, it is paramount for banks to ensure robust security measures, to foster and maintain trust, in tandem with the protection of assets.
Levelling the playing field
To counter AI-enabled fraud like deepfakes, banks need to harness the power of advanced technologies themselves. One area where regional banks can further strengthen their defences is identity verification. Ensuring the authenticity of individuals accessing accounts is crucial in preventing fraudulent activities such as account takeovers and unauthorized transactions.
Biometric-based verification systems are a game-changer in weeding out attempts at identity replication with AI. Using unique biological characteristics like fingerprints and facial recognition to verify consumer identities during logins makes it significantly harder for fraudsters to succeed in spoofing their way into accounts. Layering these verification systems together, using multiple biometric markers makes an extremely tough account security system to beat.
But that’s not all. AI can step up the game even further by detecting fraudulent activities in real time by using predictive analytics. Picture machine learning algorithms sifting through mountains of transaction data, picking out unusual patterns that might indicate fraud. These AI systems are like watchdogs that are always on duty, learning and adapting constantly to stay ahead of the bad actors. By analysing transaction data and consumer activity, banks can identify anomalies and take proactive measures to prevent fraudulent transactions before they occur.
The Challenge of implementation
Implementing AI-based solutions isn’t just about adding new technology; it’s about doing it right. This means ensuring these systems mesh perfectly with an existing technical infrastructure and ethical governance framework. It’s not a simple plug-and-play situation. Banks need to invest in the latest technologies, train their staff thoroughly, and keep a close eye on the ever-changing threat landscape. The goal is to be proactive, not reactive. Being one step ahead of fraudsters and constantly updating security protocols is the name of the game.
But, if the new security measures are too clunky or inconvenient, consumers will be the first to complain — or worse, leave. Banks must find the sweet spot between robust security and a seamless user experience. If the security process becomes a hassle, it risks driving consumers away. So, it’s crucial to make these measures as user-friendly as possible without compromising on safety.
Looking ahead
As AI technology advances, so too will the methods employed by fraudsters. Although cybercriminals are now finding fraud more fruitful, advanced AI can also be the key to not just defending against, but actively countering deepfake cyber threats to digital transactions. By fostering a culture of security, continuously educating consumers, and leveraging the power of AI, banks can turn the tide against fraud and build a more secure financial ecosystem for all.
