Financial institutions are facing the challenge of rising fraud and financial crimes, driven by the surge in digital banking and faster digital payment methods. A recent report by PYMNTS Intelligence titled “Increasing Fraud Heightens Need for Newer, Better Technologies” highlights the significance of adopting fraud-fighting technologies in the face of more sophisticated fraudulent transactions.
According to the report, 43% of financial institutions reported an increase in fraud in 2023 compared to the previous year. Additionally, FIs with assets of $5 billion or more saw the average cost of fraud rise by 65% between 2022 and 2023. This increase in fraudulent activities has resulted in major financial losses for over 40% of banks in the U.S.
The research study, conducted in collaboration with Hawk AI, identified the misuse of account information as the leading source of fraud, accounting for 38% of fraudulent transactions. Notably, digital wallets such as Samsung Pay, Google Pay, and Apple Pay witnessed a significant increase in fraud rates. Fraudulent activities in same-day automated clearing house (ACH) and regular ACH payments also experienced notable spikes.
To combat the growing threat of fraud, financial institutions are investing in advanced technologies like machine learning (ML) and artificial intelligence (AI). The report reveals that 66% of FIs with assets of $5 billion or more are currently utilizing ML and AI technologies to tackle fraud. This marks a substantial increase from 34% in 2022.
However, financial institutions still face challenges in their fight against fraud, including data breaches, the speed of payments, regulatory requirements, and the costs associated with deploying new technologies. Improved user authentication protocols, advanced technology solutions, and increased investments in ML and AI are urgently needed to address these hurdles.
By adopting advanced fraud-fighting technologies and enhancing customer communication, financial institutions can enhance their ability to detect and prevent fraudulent transactions. This proactive approach not only safeguards institutions and customers from financial losses but also provides a stronger defense against evolving fraudulent tactics.
The source of the article is from the blog papodemusica.com