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Monday, May 20, 2024

Green Sheet interviews LexisNexis Risk Solutions' Kimberly Sutherland

Recently Kimberly Sutherland, vice president, fraud and identity at LexisNexis Risk Solutions provided commentary to The Green Sheet on the hot topic of AI's role in fraud prevention and detection in the following Q&A:

Why are we seeing an increase in fraud?   Several trends indicate a rise in fraud. Firstly, professionals and networked groups across the world are increasingly coordinating fraudulent activities. Fraud targets all industries and regions indiscriminately, following an unrestricted pattern of attacks.

Secondly, increased digitalization provides fraudsters with more opportunities to exploit consumer identities and accounts. However, fraudsters ultimately focus on the interaction channel with the highest likelihood of success, whether it's in-person, online or through a call center.

According to the latest LexisNexis® True Cost of Fraud™ Study, fraud levels have increased for 53 percent of retailers and 60 percent of ecommerce merchants. Ecommerce businesses face nearly 40 percent more fraudulent transactions than primarily brick-and-mortar retailers. Financial institutions experienced a higher surge in fraud, with almost two-thirds (63 percent) reporting an overall increase of at least six percent in the previous 12 months.

What are the top concerns mentioned by financial institutions, payment services providers and merchants?

Both merchants and financial institutions prioritize preventing the impact of scam activity. Scams now account for nearly 35 percent of fraud losses in North America for retail and ecommerce businesses.

Approximately half of all merchants across North America have observed an increase in scams, mirroring similar increases reported by financial institutions, with one-fifth of firms noting a minimum 20 percent rise. Educating customers about self-protection is essential to reducing successful scams.

Businesses also strive to prevent fraud without adversely affecting the customer experience. The availability of effective passive fraud tools directly responds to this concern, although most businesses still need to adopt solutions like behavioral analytics and biometrics.

These behavioral tools also assist in addressing concerns regarding identifying and preventing malicious bot attacks, because determining whether a human is driving the transaction has become increasingly complex.

Finally, merchants and financial institutions struggle with accurately verifying identities remotely throughout the customer journey. Inadequate verification heightens fraud risk during account opening and weakens defenses against account takeover attempts.

How has AI helped speed fraudsters succeed in exploiting synthetic or simulated identities? 

Synthetic identity fraud has been a challenge for U.S. businesses for at least a decade. Tackling synthetic fraud has become an increasingly urgent priority, because more than half of all global companies reported an increase in synthetic identity fraud in 2023.

The advancement of AI has made it easier to gather, combine and fabricate identity data that closely mimics authentic identities. Fraudsters can use bots and scripted attacks to manipulate consumers into disclosing their personal and financial information, scan social media sites or even create social profiles to persuade people to share their information. This often serves as the first step in the creation of a synthetic identity, providing fraudsters with plenty of material to exploit.

By leveraging advanced analytics, real-time monitoring, adaptive learning and scalability, AI can effectively identify anomalies that suggest potential fraud across multiple channels (physical identity, digital identity, behavioral patterns, for example). How can payment processors, merchant services providers and merchants put that to work? 

Integrating attributes and signals in a layered approach, such as an adaptive, risk-based workflow, is the most effective method for detecting and preventing fraud. Deploying advanced analytic solutions can identify inconsistencies and achieve higher fraud detection rates through the combination of digital identity, physical identity, device and behavioral interaction data.

While most payment processors and merchants will opt to deploy these solutions to receive real-time assessments for making instant decisions, there are also use cases that would benefit from batch processing of transactions and deployment in a more asynchronous manner.

Using pieces of someone's traditional identifiers like name, birth date, address and Social Security number and other data points such as a person's transaction history, digital footprints, etc. is a frightening thing for consumers. Beyond paying for something like LifeLock, how can consumers better protect themselves when they are conducting business in today's digital world? 

Consumers should start by scrutinizing the website, mobile app or phone number they use to access a business or service. They should take nothing for granted. Once they are certain they have reached the appropriate destination, they should only share the minimally required information for the transaction. Yes, data minimization truly makes a difference.

Additionally, with the constantly evolving types of fraud attacks, it's crucial for consumers to familiarize themselves with the most common types of fraud that could affect them and the corresponding ways to protect themselves. Organizations that assist consumers impacted by identity theft and fraud, such as the Identity Theft Resource Center, report that most victims of successful fraud attacks are victimized more than once.

Consumers must be aware that fraud attacks can occur at all stages of their relationship with a business – while opening an account and during various activity types throughout the management of an account. They should build trust slowly and expect friction to be proportionate to the amount of risk they are encountering. end of article

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.

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