Why Fraud Management for Financial Services is So Critical

You might run a company that provides financial services of various kinds. Maybe you’re in the retail or eCommerce industry, or perhaps you’re in travel, insurance, shipping and delivery, etc. Monetary interactions happen in all of those areas, and you want to reduce vulnerability wherever they do.

On your website, you’re accepting payments for goods and services. If that system ever breaks down, it’s going to cost your company in numerous ways.

We’ll take a moment right now to talk about financial services fraud protection, and we’ll discuss the best ways for you to implement it.

The Danger that Fraud Poses

If fraud protection concerns you, you’re probably not wrong to want to look at various prevention tools and methodologies. If there’s fraudulent website activity happening:

  • You might lose a great deal of money
  • It can damage your business’s reputation

There are several places where fraud might occur. Devious internet thieves are out there, and they’re always devising new ways to try and penetrate your system and misappropriate your services.

For instance, you might have application fraud. Application fraud is an identity theft form. Someone uses a stolen identity to try to purchase your products or services.

They might try to set up a bank account with you. They may try to get you to issue them a tax rebate. They might apply for a new credit card.

This sort of thing costs the financial sector untold millions every year, and you want to have safeguards in place so these tactics will not fool you.

Other Possible Fraud Varieties

There are other possible fraud types for which your business needs to watch out. They include:

  • Transaction fraud
  • Money laundering
  • Account takeovers

It is transaction fraud when someone uses a stolen credit card to purchase your goods or services. It is an unauthorized transaction. You definitely must be able to differentiate between real customers and fraudsters in real-time.

When someone tries to clean their dirty money by passing it through a complex banking sequence, that is money laundering. Someone might try to use your institution to launder money, and you may never realize it. That makes you complicit, and you could face severe penalties before you even know what’s happening.

Another identity fraud and theft variety is the account takeover. A malicious third party accesses a user’s account credentials.

Why Does All of This Matter to You?

If you’re allowing people to scam your business in these ways, it’s going to be a bad look for you. Various government bodies will crack down on you if they feel like you don’t have sufficient security measures in place. They don’t want you to allow any identity fraud, money laundering, etc. if you could have done anything to prevent it.

Also, if this type of thing keeps happening to you, that information is likely going to go public. When it does, your legitimate customers will probably not want to do business with you anymore.

They will feel like if you can’t identify fraudsters and they keep fooling you, you don’t have the security measures in place for them to trust you with their credit card details and other sensitive data.

What Can You Do to Stop It?

There are various prevention techniques you can utilize if fraud detection and management concern you. For instance, you can have multiple cybersecurity measures in place.

Beyond that, there are fraud detection and prevention companies you can hire. If someone tries something like transaction fraud, money laundering, or application fraud, they will flag it and investigate it immediately.

What you’ll want to do is talk to the various companies that are out there to get some idea of what they can do for you. Various ones provide different services.

What you want is one that catches all fraud varieties and has a very high accuracy rate. Less than a 90% accuracy rate, and you’ll want to look for other service providers. You also want one that has a very low false-positive fraud detection rate.

You want a company that can give you data-driven insights that a layperson can understand. You should meet with their representatives periodically. Ask them whether they’re compiling data not just to identify fraud events, but to shore up your security measures to dissuade future perpetrators.

Fraud attack methods are always changing. If you have a business that offers financial services or utilizes financial transactions of any kind, make sure you have adequate fraud detection measures.