Banks Shift From Vulnerable Channels Like SMS as Fraud Rises

Galileo Technologies Chief Product Officer David Feuer told PYMNTS that there has been no shortage of money spent in the continuing, and perhaps eternal, battle against hackers, cybercriminals and online thieves. “The investment in anti-fraud technologies has been a focal point across the industry, but fraudsters will always look for ways to exploit the system […]

The post Banks Shift From Vulnerable Channels Like SMS as Fraud Rises first appeared on PYMNTS.com.

Galileo Technologies Chief Product Officer David Feuer told PYMNTS that there has been no shortage of money spent in the continuing, and perhaps eternal, battle against hackers, cybercriminals and online thieves.

“The investment in anti-fraud technologies has been a focal point across the industry, but fraudsters will always look for ways to exploit the system for their own gain,” he said.

And, as found through joint efforts between Galileo and PYMNTS Intelligence, the younger generations — the tech-savvy individuals under 40 years old — have been under a significant wave of attacks. As many as 47% of retail banking consumers in this cohort experienced some level of banking fraud this year.

“The expectation seems to be that everything is digital, and if it’s digital, they’ve learned to trust it, and that’s a poor assumption,” he said of vulnerable individuals.

Individual consumers, it must be noted, are hardly the only targets of the bad actors. The FBI has noted that business email compromise (BEC) — where fraudsters set their sights on businesses and impersonate legitimate executives, vendors or customers — have been gaining ground.

“We see BEC as a huge threat vector that’s quite challenging,” Feuer told PYMNTS.

What Providers and FIs Need to Do

For financial services providers, including traditional financial institutions (FIs), he said, it’s a critical time to create well-informed, precise fraud prevention strategies that use measuring, monitoring and advanced technologies to build up a robust, layered approach to battling the fraudsters.

“If you go back to the classic scenario of going up to the teller in the bank and swiping an ATM card, what does that look like in the digital world?” he said. “How do we take that model of authorization and authentication and move that into the digital world in such a way that protects consumers and establishes norms where consumers can get their head around the expectation of what’s normal to authorize and authenticate them and what’s not?”

The Message That’s Necessary

In doing so, it’s also incumbent on firms to communicate that “other than multifactor authentication, messaging is a poor way of communicating anything secure with customers,” he said.

There are fraud prevention models that are emerging outside of the U.S., said Feuer. Spain has taken steps to foster an industry consortium geared toward anti-fraud defenses. In the United Kingdom, estimates peg the amount of fraud that could be prevented using artificial intelligence at 100 million British pounds (about $125 million). Banking stalwarts such as Lloyds Bank have joined up with digital upstarts such as Monzo to contribute to the consortium approach and help turn back the rising tide of fraud.

In the United States, he said, “we need to continue to work together across the industry to use all the rich data that are available to us to help consumers and B2B companies.”

Getting there, he said, demands a mindset shift on the part of FIs and a broad range of providers to realize that beyond the financial losses that accrue to the bottom line when fraudsters’ schemes are successful, there can be a “corrosive effect” to businesses’ relationships with one another and to consumers’ trust in merchants and their banks.

“This leads to a loss in brand positioning,” Feuer said.

A multilayered approach to battling fraud mandates that companies look closely at the established (and optimal) channels that are used for communication with end users, he said. Super apps may have a strong showing in Asia. In the U.S., WhatsApp may be “unheard of” as a business communication channel, while the same conduit is widely embraced in the Middle East for B2B interactions.

“Integrating [banking] customers into the fabric of a security network with things like timely notifications and controls” are key, he said, “and there’s a confluence of progressive technology and apps, where we can leverage all of these things in order to drive value … and craft a foundation for the future of fraud prevention, particularly in the financial sector.”

The post Banks Shift From Vulnerable Channels Like SMS as Fraud Rises first appeared on PYMNTS.com.