The Point

Trends 2017: Risk and Fraud

Dec  06 
Author Picture 
Andrew Davies  Vice President of Global Market Strategy, Financial Crime Risk Management, Fiserv 

Moving money quickly is one thing; moving it safely is another. As financial institutions continue to meet the demand for anywhere, anytime services in 2017, the top trend for those in risk and fraud management will be providing security that matches the speed of those transactions.

Global payment infrastructures are moving toward faster payments and real-time settlement. Such speed makes it much more convenient for clients of financial institutions to move money domestically and internationally. People and businesses want faster settlement systems, multiple channel options and easier access to payment initiation.

But as settlement risk is reduced, fraud risk may increase. That scenario played out in a recent international fraud case involving bank-to-bank payments. The threat of increased fraud looms because with real-time settlement, there's less chance to repudiate a payment. Once the money has gone into the market infrastructure and potentially moved among multiple parties quickly, recovery becomes difficult.

As the industry embraces the technological trends on the horizon, it also must brace for what amounts to a perfect storm of factors:


  • Greater demands from customers of financial services. People want fast access to payments. An Expectations & Experiences survey from Fiserv this year found 68 percent of respondents have needed immediate access to money from a check. But they also want peace of mind with immediacy. Eighty-one percent ranked security over convenience in payment methods. For commercial customers, there is a similar dynamic, with speed and security crucial from a financial management standpoint
  • The emergence of disruptive technology from fintech companies. As those companies proliferate and offer alternative services, financial institutions must assess the effects on their payments business. Those alternatives may introduce risk, which may lead to reduced trust in the process. Some companies will need to play catch-up to reach the level of security required for managing international or domestic payments
  • The increasing sophistication of financial criminals. As more channels are used, malicious software that monitors payment initiations could become a greater threat. And once those criminals get the money, they often funnel it through legitimate assets, making the process opaque to those who would identify the theft.

The evolving criminal threat forces financial institutions to strike a difficult balance. They need to safeguard against fraud but also avoid negative experiences, all in an environment that demands greater efficiency and stronger management of false positives.

People and businesses want mobility, convenience and speed without the interference caused by out-of-date fraud protections raising red flags when none are necessary. Fraud detection tools that set arbitrary barriers, such as transactions above a certain amount, can often lead to false positives. The security should enhance, rather than hinder, the customer experience.

Hybrid analytics help financial institutions achieve that balance. It's a sophisticated technique that leverages a broader set of data from a consortium of institutions to analyze transactions in real time. The process identifies the nuances of behaviors that indicate fraud. And it does so in an operationally efficient way.

Essentially, hybrid analytics establishes a layered series of checks and balances across a transaction's lifecycle to help ensure what's happening with a payment is consistent with previous outcomes. It may not be enough to target one point of the transaction. Strong protection often depends on monitoring the entire flow.

As long as there's money, financial institutions know they will need to protect it. In this evolving market going into 2017, slow payments are bad. Payments into a criminal's account are worse.

Interested in learning more? Read about trends in lending, digital banking, payments, wealth management and retail banking now and in the coming weeks on The Point.