As the sophistication of fraudulent schemes increases, so must the sophistication of your fraud detection analytics. This is especially important in an uncertain economic environment that breeds opportunities for fraud. It’s no longer enough to rely on old techniques that worked in the past. Instead, you need to be plugged into machine learning, artificial intelligence (AI) and real-time monitoring to stay ahead of criminal attempts. Your customers have come to expect cutting-edge security, and fraud analytics is the best way to meet — and surpass — those expectations. Leveraging these analytics can help your business better understand fraud techniques, uncover hidden insights and make more strategic decisions.
What is fraud analytics?
Fraud analytics refers to the idea of preventing fraud through sophisticated data analysis that utilizes tools like machine learning, data mining and predictive AI.1 These services can analyze patterns and monitor for anomalies that signal fraud attempts.2 While at first glance this may sound like a lot of work, it’s necessary in today’s technologically savvy culture.
Fraud attempts are becoming more sophisticated, and your fraud detection services must do the same to keep up.
Why is fraud analytics so important?
According to the Experian® 2023 US Identity and Fraud Report, fraud is a growing issue that businesses cannot ignore, especially in an environment where economic uncertainty provides a breeding ground for fraudsters. Last year alone, consumers lost $8.8 billion — an increase of 30 percent over the previous year.
Understandably, nearly two-thirds of consumers are at least somewhat concerned about online security. Their worries range from authorized push payment scams (such as phishing emails) to online privacy, identity theft and stolen credit cards.
Unfortunately, while 75 percent of surveyed businesses feel confident in protecting against fraud, only 45 percent understand how fraud impacts their business. There’s a lot of unearned confidence out there that can leave businesses vulnerable to attack, especially with nearly 70 percent of businesses admitting an increase in fraud loss in recent years.
The types of fraud that businesses most frequently encounter include:
- Authorized push payment fraud: Phishing emails and other schemes that persuade consumers to deposit funds into fraudulent accounts.
- Transactional payment fraud: When fraudulent actors steal credit card or bank account information, for example, to make unauthorized payments.
- Account takeover: When a fraudster gains access to an account that doesn’t belong to them and changes login details to make unauthorized transactions.
- First-party fraud: When an account holder uses their own account to commit fraud, like misrepresenting their income to get a lower loan rate.
- Identity theft: Any time a person’s private information is used to steal their identity.
- Synthetic identity theft: When someone combines real and fake personal data to create an identity that’s used to commit fraud.
How can fraud analytics be used to help your business?
More than 85% of consumers expect businesses to respond to their security and fraud concerns. A good portion of them (67 percent) are even ready to share their personal data with trusted sources to help make that happen. This means that investing in risk and fraud analytics is not only vital for keeping your business and customer data secure, but it will score points with your consumers as well.
So how can your business utilize fraud analytics? Machine learning is a great place to start. Rather than relying on outdated rules-based analytic models, machine learning can vastly increase your speed in identifying fraud attempts. This means that when a new fraudulent trend emerges, your machine learning software can pinpoint it fast and flag your security team. Machine learning also lets you automatically analyze large data sets across your entire customer portfolio, improving customer experiences and your response time.
In general, the best way for your business to use fraud analytics is by utilizing a multi-layered approach, such as the robust fraud management solutions offered by Experian. Instead of a one-size-fits-all solution, Experian lets you customize a framework of physical and digital data security that matches your business needs. This framework includes a cloud-based platform, machine learning for streamlined data analytics, biometrics and other robust identity-authentication tools, real-time alerts and end-to-end integration.
How Experian can help
- Account takeover prevention. Account takeovers can go unnoticed without strong fraud detection. Experian’s account takeover prevention tools automatically flag and monitor unusual activities, increase efficiency and can be quickly modified to adapt to the latest technologies.
- Bust-out fraud prevention. Experian utilizes proactive monitoring and early detection via machine learning to prevent bust-out fraud. Access to premium credit data helps enhance detection.
- Commercial entity fraud prevention. Experian’s Sentinel fraud solutions blend consumer and business datasets to create predictive insights on business legitimacy and credit abuse likelihood.
- First-party fraud prevention. Experian’s first-party fraud prevention tools review millions of transactions to detect patterns, using machine learning to monitor credit data and observations.
- Global data breach protection. Experian also offers data breach protection services, helping you use turnkey solutions to build a program of customer notifications and identity protection.
- Identity protection. Experian offers identity protection tools that deliver a consistent brand experience across touchpoints and devices.
- Risk-based authentication. Minimize risk with Experian’s adaptive risk-based authentication tools. These tools use front- and back-end authentication to optimize cost, risk management and customer experience.
- Synthetic identity fraud protection. Synthetic identity fraud protection guards against the fastest-growing financial crimes. Automated detection rules evaluate behavior and isolate traits to reduce false positives.
- Third-party fraud prevention. Experian utilizes third-party prevention analytics to identify potential identity theft and keep your customers secure.
Your business’s fraud analytics system needs to increase in sophistication faster than fraudsters are fine-tuning their own approaches. Experian’s robust analytics solutions utilize extensive consumer and commercial data that can be customized to your business’s unique security needs.
Experian can help secure your business from fraud
Experian is committed to helping you optimize your fraud analytics. Find out today how our fraud management solutions can help you.
1 Pressley, J.P. “Why Banks Are Using Advanced Analytics for Faster Fraud Detection,” BizTech, July 25, 2023. https://biztechmagazine.com/article/2023/07/why-banks-are-using-advanced-analytics-faster-fraud-detection
2 Coe, Martin and Melton, Olivia. “Fraud Basics,” Fraud Magazine, March/April 2022. https://www.fraud-magazine.com/article.aspx?id=4295017143