Banks and online retailers have dramatically improved their fraud detection capabilities by integrating shared fraud intelligence into their risk assessments, according to the Global State of Fraud and Identity Report from LexisNexis Risk Solutions.
This collaboration has enabled a significant enhancement in identifying high-risk fraudulent transactions that might otherwise evade detection systems.
The report highlights several success stories from the financial sector, such as a major US bank that enhanced its fraud detection by 1700%, by incorporating email address risks with broader digital identity signals like device intelligence and IP address data. A leading US card issuer also saw a 2300% increase in detecting high-risk transactions by merging digital identity data with email and physical address information.
Currently, only 27% of financial services and online retailers in the EMEA region are utilising consortia or risk insights exchange initiatives as part of their fraud prevention strategies. The analysis reveals that devices showing negative behaviors pose a five-times higher risk of subsequent fraud compared to the baseline. When anti-fraud systems identify a device and email address linked to a single identity, the fraud risk escalates to eight times higher than normal.
These improved detection rates not only safeguard against fraud but also translate into substantial financial savings. For instance, Metro Bank, a leading UK financial institution, identified over £2.5m in fraudulent transactions within a six-month period using a collaborative risk insights model. This approach also helped the bank to discover that one in eight accounts flagged during this time were mule accounts, thereby preventing further fraud and potential regulatory penalties.
LexisNexis Risk Solutions’ fraud and identity director, Rob Woods, emphasized the power of combined intelligence. “On their own, components like email address and device intelligence can detect certain fraud aspects. However, when used collectively, they significantly enhance risk assessment capabilities, making them more powerful for detecting application risks invisible to banks using isolated data,” Woods said.
He further elaborated on the benefits of intelligence sharing among organizations. “Such collaboration deepens the understanding of fraudulent activities, streamlining processes and reducing investigation times. This not only helps in preempting fraudsters’ next moves but also allows organizations to focus on severe threats, substantially boosting fraud prevention outcomes,” Woods continued.
Moreover, collaborative networks offer a comprehensive platform to understand and counteract sophisticated fraud strategies, proving that collective efforts exceed the capabilities of any single entity in combating fraud.
Keep up with all the latest FinTech news here.
Copyright © 2024 FinTech Global
