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3 ways financial institutions can reduce digital banking fraud

By Leandra Monteiro

June 23, 2021

  • America

Fraud, Banking, digitalIn a recent global banking fraud survey, cyber fraud was found to be the biggest challenge faced by financial institutions today. To combat this banks and financial institutions are undertaking a massive transformation across digital and mobile channels in engaging with their customers and their use of artificial intelligence (AI).

Banks are combining machine learning with biometrics to provide new safer and secure experiences, such as facial and fingerprint verification instead of passwords. Furthermore, here are 3 ways banks can prevent digital banking fraud:

Multi-Factor Authentication: This multi-layered approach from a software standpoint, combined with old-fashioned phone calls to the customer to confirm a questionable transaction, can cut the institution’s headaches and the business’ fraud losses.

Multi-factor authentication is an electronic authentication method in which a user is granted access to a website or application only after successfully presenting two or more pieces of evidence (or factors) to an authentication mechanism. MFA protects the user from an unknown person trying to access their data such as personal ID details or financial assets.

Educate your customers: One of the most important steps is educating the customer. Continuous engagement with customers about the dangers of fraud is vital. Realistic views of the risks they face and tips for transacting safely are all shown to be well received. Banks also in turn gain their customers’ trust by detailing the measures put in place to protect their customers from fraud.

Watch out for internal fraud: Unfortunately for banks, they are perfectly placed to attract fraudsters on the inside. In fact, research indicates that as much as 70% of banking fraud is thanks to insiders. A number of times bank customers’ data is at risk, as account details and PIN codes get sold on the black market.

To prevent such activity, banks must screen and audit employees. A bank’s ability to identify their customers, monitor transactions, and raise the alarm about suspicious activity in real-time is of far greater value.

ALSO READ: Cybersecurity in Financial Services Report 2021

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