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70% of FIs rely on AI and ML for fraud defence

Wednesday, March 27, 2024 — 12:16:00 (EDT)

Espoo, Finland, March 27, 2024—70 per cent of financial institutions are using artificial intelligence (AI) and machine learning (ML) to fight financial fraudsters according to a new report.

The Financial Institutions Revamping Technologies to Fight Financial Crimes survey revealed that financial institutions are becoming increasingly frightened of fraudsters with 40 per cent admitting that fraud incidents are on the rise.

Many of the surveyed financial institution have adopted AI and ML as part of their fraud prevention tools, mostly relying on a mixture of in-house fraud prevention platforms, third-party resources and new technologies to protect themselves and customers.

90 per cent of respondents shared that they use fraud prevention application programming interfaces (APIs) to mitigate fraud, while 80 per cent use adaptive and web-based multifactor authentication.

Perttu Nihti, Chief Product Officer of Basware, commented: “Due to the high volume of payments, large financial institutions are prime targets for fraudsters through means such as vendor impersonation scams. An automated defence against fraud using AI and ML is essential for financial institutions, especially the CFOs who are ultimately accountable for any errors.”

“AI can significantly bolster the accuracy of fraud detection through sophisticated algorithms that analyze vast amounts of data to detect outliers and suspicious activity indicative of fraudulent behavior. Not only that, but AI algorithms can be trained to minimize and reduce false positives which limits the number of legitimate transactions that are mistakenly flagged as fraudulent.”

“As CFOs battle against the rising tide of fraud, implementing AI and ML solutions through partner organisations is a good way to share the compliance burden. The CFO is ultimately responsible, but having a trusted partner who can stay on top of evolving mandates and regulations as well as reduce the risk of fraud through technology can help share the load.”

Typically, financial institutions develop less than half of their alert technologies for alerting customers about questionable transactions in-house, while 30 per cent develop over half. Only 20 per cent of financial institutions develop their alerting tools completely in-house.

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Source: Company press release.