Monday, March 14, 2011

BAI attendees look for new approach to fighting fraud

Posted by Mark Brousseau

Combating fraud -- and more efficiently and precisely identifying suspect transactions -- was the hot topic at last week's BAI Payments Connect conference in Phoenix, said US Dataworks ( Product Manager Leilani Doyle (

"Here is the issue: financial institutions have fraud systems that send alerts each time a suspect transaction is idenitified," Doyle explained. "Seventy-five percent of these suspects prove to be false positives. Financial institutions need a better way to prune out the false positives with a higher percentage of accurately identified fraud."

"By using an enterprise fraud hub -- which consolidates payments and related data from various channels -- banks can reduce the number of false-suspect alerts they receive by more than 50 percent, without the risk of letting a higher number of fraudulent transactions slip through," Doyle said. "One bank did a presentation at the BAI conference explaining how breaking down payments silos would allow banks to more easily 'connect the dots' to identify systematic fraud. If payments silos do not share information, the ability to identify organized fraud is far more difficult -- if not impossible."

Another bank did a presentation at BAI Payments Connect on how it has used modeling to monitor a higher number of transactions while reducing the staff required for this function by over 30 percent.

Beyond fraud, another theme of the event was how banks can regain a competitive advantage in the payments space. Doyle noted that Federal Reserve Bank executive Richard Oliver gave an insightful presentation on how banks have lost their edge in transaction processing to non-bank competitors. Banks have been too slow to react to changing market demands, and this dawdling could eventually cause them to be lose further ground to nimble competitors with more compelling products, she said.

The good news: Oliver said businesses still have tremendous trust in banks -- something that should not be discounted. But banks will likely have to partner with other entities to bridge their product gaps.

What do you think?

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