Read back any of our previous articles and you will soon notice a common trend - that of the rapid acceleration of everyday life. People want to be able to buy goods from or send money to the furthest reaches of the planet instantaneously, want to have immediate access to banking services from anywhere in the world and want immediate resolutions to any and all challenges along the way.
Of course, it’s not just customers who are speeding up. Fraudsters are constantly refining their techniques, too, and the sheer quantity of transactions the major banks handle on a daily basis make it functionally impossible to make sure that each and every one is on the level. That being the case, it’s entirely possible for some devious wrongdoer to drain your bank balance to zero and for days to go past before anyone notices. In fact, the annual report of the Reserve Bank of India stated that frauds of over ₹100,000 have more than doubled in 2020, hitting a total value of ₹1.85 trillion.
The fraud engines used by traditional banks seem to be somewhat inconsistent with their effectiveness. Forget to tell your bank that you are heading off on a short holiday overseas and, within minutes of buying a cup of coffee using your debit card, your account is locked, necessitating a lengthy and inconvenient process to give you back access to your own money. However, multiple withdrawals from an ATM far from your registered address, all at 3 am and all at amounts just low enough to avoid being too suspicious (but adding up to the entire contents of the account) apparently fails to trigger any kind of response.
FinTech to the rescue
So, now that we have suitably terrified you, we should probably mention that banks are not completely ignorant of concerns such as these. There are already several approaches that banks are enacting to minimise fraud, many of which are fintech based. Of course, the aforementioned report from the Reserve Bank of India shows that there is still room for improvement.
A significant addition to the arsenal of the banks is the development of artificial intelligence (AI). Software that can instantly inspect and analyse huge volumes of data can, if properly programmed, provide a significant improvement to the fraud engines we lampooned above. It can look out for uncharacteristic behaviour based on the account holder’s transaction history, instantly spotting that said holder either routinely visits other countries or does not regularly travel to the far side of the country in the early hours of the morning.
One of the much-touted benefits of an AI-led fraud detection system is the fact that such a system can judge the seriousness of each suspicious case. This frees up the fraud analysis team’s time, allowing them to focus on serious cases and reach resolutions quicker. Of course, that’s not necessarily a great relief for those whose money disappeared in what was deemed to be a “minor” case of fraud, but a line has to be drawn somewhere.
Hope for the future?
Unless you have been living under a rock for most of the last decade, you’ve probably come across the word “Blockchain”, generally in conjunction with “Bitcoin” or “cryptocurrency”. While the huge profits made by those who dared to invest at an early stage certainly grabbed the headlines, the technology behind it is what’s really interesting.
The “Distributed Ledger Technology” at the heart of Blockchain makes hacking an account extremely difficult. We can’t technically say that it would be “impossible” since no security system is entirely without its weaknesses, but the processing power required to crack it makes it functionally impossible. Banks are already showing an interest in adopting and making use of this technology, which will at least make direct bank transfers more secure. However, it won’t solve the many other weaknesses that fraudsters typically exploit.
In an ideal world…
One of the challenges faced by traditional banks in terms of countering fraud is right there in the name - “traditional”. Such large, old and venerable institutions are generally limited in the amount of innovation they can enact at any one time. This can be both a reluctance on the part of their shareholders, staff and customers to embrace significant change as well as just the technical challenge of putting such changes into effect across such a vast number of accounts and transactions.
Smaller, fintech-led neobanks have a considerable advantage, in this regard, not least because newer generations are increasingly putting their trust in tech over traditional banks. But what technological solutions could be used to ensure that more forms of banking fraud get caught before they become a serious problem?
Real-time alerts for every transaction
Starting with the simplest solutions, perhaps the easiest to enact would be to make sure that customers get a notification every time there is a transaction on their account. Several larger banks already do this, in fact, though a surprising number are still lagging behind.
Kasikornbank in Thailand, among others, sends you both a text message and an email each time you complete a bank transfer. While this is potentially a nuisance for most customers, you will certainly be grateful for it on the day when you get an alert informing you that your account is being drained without your permission. However, perhaps a greater amount of control over which channels are used to send notifications would be helpful.
A personalised fraud engine
We already effectively described this above when we talked about the use of AI in fraud detection. However, we specified that it would only work if correctly programmed. The logical next step, therefore, is to allow your customers to programme the AI themselves.
We don’t mean literally writing lines of code, of course - not unless you want to run a bank exclusively for professional-grade software engineers. Instead, provide customers with something like a questionnaire, the answers to which will determine what the AI does and does not consider to be fraud. For example, you could have a question asking how often the customer travels overseas and which parts of the world they routinely visit and set up a demand for two-factor authorisation if a transaction is requested in a part of the world you haven’t specified.
Better credit and debit card interaction
Credit cards are certainly useful things and they come with a huge suite of useful features and bonuses. However, they inherently come with one fundamental flaw that has always made them unpopular with a certain type of customer - they allow you to spend more money than you actually have. It is distressingly easy to lose track of exactly how much you’ve spent and digging yourself deeper and deeper into debt.
The problem faced by those who prefer to only spend the money they have (and not the credit given by their card issuer) is that debit cards have few of the security measures than credit cards have. The best of both worlds would be for the credit card expenditure to be cleared automatically each day (or even each transaction) with funds drawn from savings or current accounts.
Again, this is technically possible already but takes a little setting up. There is also currently no means of preventing you from overspending. Solving this problem would likely reduce the amount of fraud perpetrated against debit cards by minimising their use. Alternatively, just apply the same security measures credit cards use to debit cards.
This article is provided to you by DeeMoney. Thailand's money transfer solutions provider licensed by the Bank of Thailand. Interested in transferring money from Thailand to the world? Download the app from the Google PlayStore or the Appstore to get started.