Using Analytics to Fight Fraud in Finance Sector

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Raj Joseph - April 20, 2016

Analytics

Analytics in financial industry

Fraud in finance sector is a “real threat” that banks and other financial institutions are facing often these days. It is certainly a gift of technology that has made us so vulnerable! Are we having enough resources to fight it out? Let’s find out!

In this age, when technology is ruling our lives and adding so much value to it, we have become totally dependent on them. Certainly, it has opened avenues for all of us and given us so much comfort but it has its flip side too. It has brought new means through which people having bad intentions get a chance to do frauds. Yes, we are more prone to frauds, big frauds – This particularly rampant into the banking industry. There are few threats that can challenge the very existence of this huge industry called “banking industry”.  Debit or credit card fraud, cheque fraud, electronic fraud and last but not the least, identity fraud. All these crimes are highly sophisticated and organized that adds to the problem.

To detect and mitigate financial frauds, the banking institutions need to apply an integrated approach. Some of the key phases while applying this integrated approach are:

  1. Detect: In order to detect fraud, the banking institution needs to apply advanced analytics. Just checking small chunks of data can’t help them detect or prevent a crime. For keeping the business safe from both internal and external threats, these banks need to analyze bigger volume of data from varied sources.
  2. React: Once a fraud is detected, it is time to respond. Apply fraud insights and analyse streaming data so that objectionable activities can be interrupted and immediate action can be taken. Analytics of data helps in differentiating between legitimate actions and suspicious actions, thus give appropriate results.
  3. Investigate: Now that we have found the culprit, it is time to investigate. We have to put fraud intelligence into action. Use data analysis and case management in order to perform and manage inquiries related to fraudulent activity. This is a critical stage so the victimised institution needs to be alert and attentive.
  4. Recognize: Finally, we need to find out the loop holes in the running system. Use big data and analytics to identify suspicious activities that is affecting the banking activities. It can be done by analysing the historical data through which we can easily figure out the patterns of fraud and financial crimes.

In order to support an organisation to come out of this fraud and financial crime the savvy data analysts generate patterns and expose loopholes that aid to the financial crimes. It is generally done in real time; hence financial impact is reduced or sometimes stopped completely. In order to outperform here are some best practices which analysts follow sincerely:

  • Elevate the issue: It is essential to bring any fraudulent activity to higher authorities. Establish cross-organizational leadership to defy a silo approach. It is a must for finding fast and appropriate solution.
  • Analyse in-depth and act powerfully: An in-depth and layered analysis at each level of fraud lifecycle is mandatory. And then act with speed on suspicious activity as and when it is identified. A delay can be fatal!
  • Adapt to the technological advancement: Technology has the power to automate response, adapt to the evolving threats and connect to the global intelligence networks that works industry-wise. A trained pool of techies run this entire system that can clean your banking system and run it smoothly for years to come.

If you want a fraud resistant banking system, data analytics is a must. Find out a professional who can figure out the loopholes in your system and can help you get rid of this very dangerous bug called “fraud”.

Be aware to stay safe!

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