Why detecting Financial Fraud using AI is in full swing?
Ring Capital just led the $10m first round of financing in Bleckwen, a machine learning based solution for fraud detection & prevention in financial institutions. Here are some of the reasons why we decided to invest in this breathtaking technology, amazing team and expanding market.
As consumers want to gain more and more control and visibility over their finance management, new players and regulations emerged these past few months.
Neo-Banks are engaging more and more consumers by bringing cutting-edge features, well-designed interfaces and amazing customer experience. Regulations like “PSD2” and “SEPA” also intends to make life better for customers favouring the development of open banking API and instant payments.
Satisfying these customer needs is also creating new breaches for fraud and new challenges for banks to detect it. And as we can see in the news lately, neo-banks are not spared. N26 faces banking regulator order about fraudulent transactions and Revolut CFO resigned as company faces questions over money laundering. In addition, experts predict online credit card fraud to reach $32 billion in 2020.
To prevent fraud gaps, Strong Customer Authentication (SCA) is now imposed on European banks when people are logging into accounts and making payments. Banks will be allowed to do a real-time risk analysis to determine whether to apply SCA to a transaction. This may only be possible if the bank’s overall fraud rates for card payments do not exceed specific thresholds.
Advanced technology for fraud detection can then play a major role in minimizing the friction that customers encounter when asked to authenticate themselves. It also gives the opportunity for banks to address proactively financial crimes as transaction volume keeps growing, so do alerts, false positives, and compliance teams.
“Using AI and machine learning to police the financial system is creating opportunities to do things better, to protect customers and ourselves.” recently said Douglas Flint, HSBC Chairman.
It will not only help financial institutions who can employ more than 5,000 employees in fraud screening alone, but also enhances the ability to process and leverage customer data. Machine learning can therefore act as a persistent source of insight into customer behaviour letting financial institutions better targets customers and suggests new services for them.
It’s a fantastic opportunity for banks to both better prevent fraud, meet latest market standards and take advantage of building maximum insight from their customers. As most banks already have in-house fraud expertise, their organization could fully benefit from AI solutions by working with technology solutions experts in the space.
Besides, Artificial Intelligence techniques also hold great promise in improving the Anti Money Laundering (AML) and Counter Terrorist Financing (CTF) frameworks that financial institutions are working with.
