There’s this so-called “squeezing a balloon effect” in the area of fraud among financial institutions — and credit unions are no exception.
In the global landscape, financial institutions including credit unions should expect the unexpected. The battle against fraud in this evolving digital world is never-ending. Fraudsters continue to innovate and find new ways to attach and they are moving to use multiple channels and sophisticated fraud schemes. Credit Unions that focus on fraud prevention efforts only on one channel are putting themselves at risk… it’s a lot like when you poke or squeeze a balloon and the air shifts from one area to another. This is an analogy for the ever-changing pressures when sophisticated fraud attempts get past reactive prevention measures and uneven governance frameworks consequently producing destabilizing consequences. In other words, they are vulnerable elsewhere.
McKinsey reports that the worldwide incident of fraud has been skyrocketing and is predicted to be close to $44 billion by 2025. The report states one major U.S. bank, as an example, which suffered above the industry average due to its highly fragmented fraud and compliance processes across an organization. Its technology systems were scattered across business lines, resulting in a lack of comprehensive customer view across channels. This made it difficult to gauge fraud losses and attempts. While identify theft has been mutating from card skimming to account takeovers, financial organizations have just recently been faced with synthetic ID fraud cases with one case costing $24 million of COVID-19 relief money as we have detailed in our previous blog post.
Understanding How Fraud Works
The battle against fraud in this evolving digital world is never-ending. Fraudsters continue to innovate and find new ways to attach and they are moving to use multiple channels and sophisticated fraud schemes. Credit Unions that focus on fraud prevention efforts only on one channel are putting themselves at risk. This will also help them shape their approach to fraud management. After all, digital evolution has made new digital channels available for customers and members — as well as fraudsters.
Higher fraud rates have been observed among payment channels such as mobile payments. Cyberattacks these days are often initiated by malware, which remains undetected for long periods before they are activated. Ways on how criminals can steal authentication information have become smarter and even more convincing than ever. Just last February 15, a credit union with more than 1 million members warns of a spike in scams targeting local customers. The credit union has had almost $1 million in fraud attempts in only the past 2 weeks.
Social networks have become the fraudsters’ means to recruit and collaborate with one another. Identity thefts have leveraged these channels to steal credit union members’ personal information using advanced technologies. “For as little as $150, anybody can go buy code that is very effective at hacking,” said Dayne Myers, a Solution VP in McKinsey’s Silicon Valley office.
Sometimes, even legitimate credit union members can commit fraud. By pretending to become a victim of identity theft to escape loans they cannot afford to pay, the victim becomes the fraudster, and the fraudster is within the institution. This is called “credit washing,” another type of fraud.
As bad as it may sound, while financial institutions focus on strengthening a vulnerability, cybercriminals find new areas of weakness.
Zero Vulnerabilities with Omnichannel Fraud Solution
Leading financial businesses are taking digital approaches to implement an omnichannel full-stack fraud solution that is integrated across the organization and across the member journey. An omnichannel fraud solution is designed to improve the effectiveness of fraud investigations — which is significant to preventing fraud.
Ideally, an omnichannel fraud solution is integrated across all lines of business, and all interaction channels, be it branch, telephone, online web or mobile, etc. With such advanced integration across multiple channels, an omnichannel fraud solution is designed to provide credit unions with visual monitoring, advanced analytics and real-time alerts sourced from unified data flows to guide credit unions in their investigation and decision-making process. And this process is crucial. Very crucial. From a comprehensive point of view, it allows investigators to have a thorough view of their members’ behaviors, leaving no loopholes in fraud investigations.
An omnichannel fraud solution is also designed to present relevant information to the credit union’s investigator quickly — and allow it to be understood easily. This can speed up the investigation process and avoid false positives for non-fraud cases.
Moreover, there are sophisticatedly designed omnichannel solutions that allow for configurable process automation. This means the omnichannel solution can detect process wastes, scrutinize performance variations, help identify where handoffs can be limited, and enable collaboration across the organization with a very strong and immutable audit trail.
Effectiv’s Omnichannel Fraud Solution, for example, features enhanced fraud reporting to track effectiveness metrics and fraud loss across all business lines and channels. The system can pull disparate data sources into a single, centralized place for the investigators in a centralized access-controlled manner. It can do link analysis across entities and cases for faster decision-making and automatically detect previously unseen patterns. And from constantly studying these unseen patterns, the intelligent omnichannel fraud management solution “learns.” With machine learning, it can detect more sophisticated fraud patterns and attempts while minimizing false positives.
For financial institutions, these capabilities are key to navigating the ever-evolving fraud landscape. They help increase speed, reliability, accuracy while minimizing cost and errors — resulting in better customer satisfaction and organizational integrity. To learn more on how your credit union can enjoy these benefits from an omnichannel fraud solution, and leave your organization with no areas of vulnerability, visit effectiv.ai.