Manchester, England-based fraud specialist Insider Technologies embarked on a roadshow in the United States to market its fraud management service, Sentra. But along the way, Insider Technologies Executive Vice President John Bycroft is gaining insights into inefficiencies and lapses in fraud prevention and mitigation strategies employed in the U.S. financial services sector.
The roadshow, which began April 28, 2014, and will run through Cartes America 2014 in Las Vegas in mid May, has Bycroft introducing Insider Technologies and its services to bank executives, ATM network operators, card brands, aggregators and others in New York, Chicago, Los Angeles and San Francisco.
Bycroft's impression so far of anti-fraud programs in the United States is that many financial institutions (FIs) are fighting fraud in "the rearview mirror." "They are processing the fraud reports overnight or the following day, or two days later," he said. "We spoke to one U.S. bank who has a part-time staff come in on a Thursday and look at last week's suspicious activities."
Bycroft noted a report from a U.S. fraud investigator said only 71 percent of FIs employ fraud management systems. "Does that mean that 29 percent of U.S. banks do not have fraud management systems?" he said, an especially disconcerting notion given the prevalence and escalation of fraud attacks recently against retailers and others in the United States. He stated, "If there are any banks in the western world that do not have a fraud management system, we find that absolutely incredible."
Bycroft does not attribute pervasive weaknesses in fraudmanagement to incompetence, but rather to the pressures brought to bear on FIs today. "When we talk to American banking executives, I do think they are being pulled in many different directions," he said, adding that the push for them to adopt the Europay/MasterCard/Visa (EMV) chip card standard is chief among them.
Insider Technologies is not a new kid on the fraud fighting block. Bycroft said the company has been building its fraud management capabilities in Europe over the last 25 years. It boasts the British government, the British and German armies, and the U.K.'s Government Communications Headquarters (the equivalent of the U.S. National Security Agency) as clients.
Since the 1990s, Insider Technologies has provided anti-fraud services to U.K. banks, including the Bank of England, Barclays, Lloyd's of London and the Royal Bank of Scotland. But Bycroft said the last five years' advances in telecommunications and data processing have multiplied the company's anti-fraud capabilities.
"We can now analyze the data far more quickly, far more easily and far more effectively," Bycroft said. "And we can analyze on the fly and in real time and it is phenomenally powerful."
The company's new technology, Sentra, is based on its capacity to store and analyze big data. "We capture all the data and create a superior data set that the bank is generally keeping," Bycroft said. "And we keep that data forever. We have banks that have got 10 years' history of every single transaction."
With that data, Sentra pinpoints, in real time, trends and patterns that may signal fraudulent activity. For example, Sentra can quickly red flag a $10 million merchant refund fraud scheme that might otherwise go undetected in a bank's system, according to Bycroft.
Sentra also takes advantage of social media to combat fraud and reputational damage. Bycroft said Sentra scours sites like Facebook for the geolocation data of its users to verify transactions when people travel overseas, for example. Sentra also "turns the firehose" on Twitter to search for mentions of its banking clients so FIs can mitigate the effects of negative publicity, he added. Reputational damage incurred via social media is "a big issue at the moment for quite a few institutions," he said.
Bycroft believes that the U.S. financial services industry's transition to EMV has been hampered by the very size and scope of the marketplace, which comprises 8,000 credit unions and 10,000 banks. It is a far different picture in the U.K., where a dozen or so banks spearheaded the move to EMV several years ago. In the U.K. "it is actually much easier to get a consensus of opinion and loose confederacy of collaboration to take something forward," Bycroft said.
The U.S. market's diversity makes it a great opportunity, but a problematic one, for Insider Technologies. Bycroft said the U.S. market represents a chance for Insider Technologies to convince a lot of FIs of the benefits of Sentra, but it is also a daunting task because there are so many FIs that need convincing.
It was this dilemma that convinced the company to take Sentra on the road. Bycroft stated, "The roadshow idea really came out of an urgent desire that actually we should be shouting louder and we should be making a bigger announcement in saying, 'Hey, guys, the problems that you are facing are the problems that we've had in Europe. And quite a few of the issues you are facing, we have handled.'"
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