Fraud is a major—and growing—problem for financial institutions.
The Growing Threat of Fraud
The scope of the payments fraud challenge is staggering, with total losses forecasted to hit record-high levels in the next few years.
According to the Nilson Report, global card fraud losses reached $33 billion in 2022, with the U.S. market comprising roughly 40 percent. Additionally, total losses are forecasted to reach nearly $400 billion worldwide over the next decade. According to Experian, a surprising 6 out of 10 consumers stated they experienced some form of attempted fraud in 2023.
Beyond financial losses that directly impact profits, another significant risk to institutions is the reputational loss of a cardholder’s trust and business. After experiencing a fraudulent attack, cardholders will often adjust their payment behaviors regardless of whether the fraudster was successful or not.
77% of cardholders expect their bank or credit union to leverage technology for better fraud prevention, underscoring the growing demand for advanced security measures. Additionally, these customers are willing to leave their institution should they believe that prevention measures are not up to par.
To remain top-of-wallet, issuers must adopt a preventative mindset that stops fraud before it has the opportunity to erode customer trust in their organization
Beating Fraudsters at their own Game
One of the main drivers for the increase in payments fraud is the emergence of AI technology, which enables fraudsters to be faster and more agile. The rapid advancement of such technology has aided in the expansion of fraud schemes that target card-not-present (CNP) transactions online, along with phishing and account takeovers (ATO). It’s also been a catalyst for frightening new lines of attack like deep fakes.
The range and variety of fraud is mind-boggling. In addition to these attack angles, payments fraud also includes schemes like check fraud, triangulation fraud, identity theft, ATM and fuel pump skimming, and gift card fraud, to name a few.
Historically, card issuers have relied heavily on detecting fraud occurrences after they happened, using rules-based analysis and manual reviews of payment transactions to detect suspicious patterns at the merchant, BIN and geographic levels.
But as effective as these methods have been in the past, they are no longer adequate to minimize financial losses on their own. To stay ahead, institutions must leverage the same tools as the bad actors by incorporating advanced technology like AI, machine learning, and predictive analytics into their portfolios. This enables them to identify emerging fraud trends and stop them before they affect cardholders. As a result, the issuer gains critical time to respond and put proactive measures in place to prevent financial losses.
Such predictive, technology-enabled solutions can analyze massive volumes of payment transaction data in real-time, enabling the detection of suspicious activity with a high degree of accuracy far beyond traditional measures. These methods create fraud scores based on the financial institution’s customized risk profile, providing automated detection and recommendations that allow fraud prevention specialists to respond quickly to threats without the need for manual intervention and analysis.
Machine learning models can adapt quickly and continuously to new threats as they emerge, providing scalability to compete with the greater agility and size of modern fraud threats.
Predictive Analysis Keeps You One Step Ahead
CPI is at the forefront of innovative payments fraud mitigation strategies through our strategic relationship with Rippleshot, a leading provider of technology-driven fraud prevention solutions. We offer bundled market-leading fraud prevention solutions, including Rippleshot’s Rules Assist and Sonar, for managing card risk through increased visibility and rapid risk detection. Powered by machine learning, predictive analytics analyze millions of card transactions daily to provide quick, powerful insights into data breaches and fraud.
The platform leverages a vast consortium of data to spot fraud trends and threats, empowering institutions of all sizes with greater transaction data than they would have access to themselves. This allows issuers to identify cards at risk of attack more effectively and set merchant rules to safeguard their cardholder-base from high-risk transactions and false positives.
CPI and Rippleshot can help protect your institution and cardholders from the growing threat of payments fraud—before you become the next victim. Contact us to learn more.
About the author
Megan Meek
Director of Digital Solutions
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