Fraud Detection - Fraud detection at banks

from | 16 November 2020 | Basics

For many hundreds of years, banks were the The place to go for all kinds of money transactions. Digitalisation is putting an end to this regularity and transforming the industry. Innovative business models from FinTechs have brought competition to the banking industry in all its areas of expertise. New methods and tools such as fraud detection have become necessary in response to the new developments in online banking. This article gives an overview of the changes in the industry and the use of fraud detection.

An industry in transition

Anyone who wants to borrow money today no longer automatically goes to a bank branch, but rather to Google. Platforms that offer crowd lending can be found there as well as FinTechs. The alternative to the bank advisor today is the community and so-called robo-advisors - intelligent Chatbotswho give financial and investment tips. The situation is very similar in the areas of investment, payments and financial investments.

However, at the same time as the many new opportunities from the areas of banking and investment, new dangers and risks also arose. These affect both the bank customer and the banks themselves. Attacks by hackers, attempted fraud through phishing and other forms of cybercrime call the security of online banking into question.

Mobile banking in particular is increasingly being targeted by attackers. The solution for these new challenges is provided by Data Science. With Fraud Detection tools, fraud cases can be detected and successfully combated. become.

The new dangers in online banking

Those who conduct their money transactions online are consciously or unconsciously exposing themselves to the new dangers brought about by the digitalisation of the monetary sector. Since the demands and behaviour of customers have changed permanently in this process, the way back is no longer an alternative. This is why banks in particular must increasingly address the issues of data security, data management and data security. Data governance and data protection.

One challenge in this area is the diversity of fraud cases. Methods that were successful once and are therefore well-known are varied the next time or replaced by a new one. At Phishing for example, fake e-mails are sent to bank customers in order to obtain their private account data. Since mobile banking is also increasingly used in the private banking sector, there are often cases in which mobile TANs sent via SMS have been intercepted.

In addition Hacker attacks, malware, viruses and TrojansSome of these spy on bank customers' access data. Because more and more often, sensitive data is stored in Cloudswhich do not offer one hundred percent security.

What do fraud detection tools do for the banking industry?

With data science methods, it is possible to effectively counter attempted fraud, to detect it successfully and to combat it. Fraud detection tools use an effective means to do this: the Behaviour of fraudsters is characterised by a deviant pattern, which can be Data analyses can be recognised.

Through Big Data Analytics, these Patterns are identified and it can be found out whether there is a case of fraud or not. Even the smallest anomalies can be detected in large data sets. The crucial thing is that these findings must be available in real time, so that in the case of fraud, it is possible to react immediately.

How does Big Data analysis work? Since Big Data has become an important industry standard, we clarify the basics in this blog article.

Mobile banking is increasingly blurring the line between online, home and mobile banking. This makes it more difficult to clearly distinguish which transactions are attributable to the owner of a bank account and which may indicate fraud.

When the patterns of movement, behaviour and transactions become more complex, an at least equally smart algorithm necessarywho must distinguish the behaviour of a bank customer from the behaviour of a fraudster. In the course of this, methods such as Machine Learning or in general Artificial intelligence more important. An intelligent Fraud detection tool would sound the alarmAs soon as account movements are registered that fall out of a pattern that is recognised as the norm.

Fraud detection in the area of e-commerce

The functioning of fraud detection tools is so elementary that their scope of application is Not limited to the banking industry is. Other companies, public organisations and commerce in the field of e-commerce also increasingly have to deal with the issues of economic fraud, web fraud and hacker attacks.

Wherever payment transactions take place, customer accounts are created and operated or other financial services are offered, fraud detection tools can help, Identify fraud cases reliably and reduce them significantly. As customer numbers and acceptance in e-commerce continue to grow, fraud protection is becoming increasingly important for businesses.

The role of communities for banks

More and more often, people inform themselves in forums, communities and social media about services and products in the field of finance and banking. Fraudsters are also taking advantage of this circumstance and luring people there with fraudulent offers or provide false information.

With comparable methods of fraud detection in the banking sector, advisory services in communities can be analysed and made secure. For this purpose, the behaviour of users in communities is observed over a certain period of time. By means of scoring, it can be determined which contributions of a user are actually helpful or whether they were written with fraudulent intent.

Fraud detection tools offer security for all sides

Fraud detection tools therefore provide comprehensive protection wherever financial services, payment transactions or account management. The intelligent Algorithms make it possible, Effectively distinguish fraudulent from harmless transactions in real time. In this way, they provide banks in particular, but also start-ups from the FinTech sector or companies in the field of e-commerce, with a valuable tool to counter the ever-increasing danger posed by hacker attacks and cybercrime.

Fraud detection tools are only one component of a comprehensive security package from which banks, bank customers and other financial service providers can benefit. In addition to the detection of fraud, scoring in particular leads to more security and better risk assessment.


Michaela Tiedemann

Michaela Tiedemann has been part of the Alexander Thamm GmbH team since the early start-up days. She has actively shaped the development from a fast-moving, spontaneous start-up to a successful company. With the founding of her own family, a whole new chapter began for Michaela Tiedemann at the same time. Hanging up her job, however, was out of the question for the new mother. Instead, she developed a strategy to reconcile her job as Chief Marketing Officer with her role as a mother.

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