Taking the next big step in banking fraud prevention

Fraud prevention represents one of the biggest concerns of the banking industry. 

In Europe, online banking fraud increased by 12 per cent from 2011 to 2012[i], with total private sector fraud estimated at €21.2 billion[ii] per year.  This figure is staggering, but nothing compared to the lost productivity and damage to reputation and customer confidence. There is also the fraud that goes undetected, impossible to account for and assess.

The introduction of new products, use of new distribution channels and digital transformation increases banks’ fraud risk.  Big data, social media and the cloud create new vulnerabilities which must be addressed with new detection technique.

The ramifications are far-reaching. Regulators are demanding that banks hold more capital and demonstrate they have active programs to prevent fraud and financial crimes (such as money laundering). Fraud impacts financial performance and creates reputational damage, which can lead to the loss of customers and market share.

When it comes to fraud detection most banks face similar challenges: disparate transaction systems, piecemeal fraud detection solutions and too many false positives, inefficient investigative processes, and a lack of speed in transaction authentication, which all drive up operational costs. The challenge remains to balance customers’ desire for fast and easy transactions while ensuring the bank’s fraud prevention solution imposes the security steps to minimise loss.

“The industry is crying out for better ways to fight fraud,” says Eric Reich, BIM Practice Leader, Continental Europe, Capgemini Financial Services. “In response, fraud management systems have evolved from stand-alone basic detection to enterprise predictive risk assessment, integrating customer experience, big data, advanced analytics, and real time functionality.”



Leading banks are now capitalising on four emerging trends in fraud management:

Centralisation of fraud management operations

Forward-looking banks constantly update fraud management systems with new rules, statistical models and acquired knowledge. This process becomes easier and more efficient with centralised systems.

Usage of more real-time external data

Several banks are looking at external information obtained from third parties and intelligence from social networking sites to improve fraud detection capabilities.

Next generation authentication

Organisations that are able to secure their transactions by moving to the next generation of authentication, such as biometric authentication enabled through mobile technology, can create a competitive advantage.

Use of advanced analytics

Several banks are implementing out-of-pattern analysis, comparing peer group behaviour with customer activity to identify outlying transactions, and linkage analysis to better detect entities associated with known types of fraud.  They are also applying specialised rules for specific transactions and developing models for fraud-scoring and quantitative insight.

Implementing a comprehensive program to detect and prevent fraud can lead to faster and more effective detection, higher visibility of exposure across channels, improved customer retention, lower total cost of ownership, protection of reputation and reduced financial losses. As banks look for a competitive advantage, taking the next step in fraud prevention is of paramount importance.


Eric Reich is the Business Information Management Practice Head, Continental Europe, Capgemini Financial Services

Email us at FSbigdata@capgemini.com

Visit us at www.capgemini.com/banking

Call us on +44 (0)2032023323

[i] Annual Fraud Indicator 2013 by National Fraud Authority , UK

[ii] Annual Fraud Indicator 2013 by National Fraud Authority , UK


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