Online bank fraud has increased ten-fold over recent years.
The number of hackers and fraudsters targeting banks has risen sharply as the security measures put in place to protect people’s accounts aren’t matching the speed in which computer geniuses can gain access.
“online fraud is costing banks $15 billion each year”
According to internationalbanker.com, online fraud is costing banks $15 billion each year, outlined in the 2016 Javelin Identity Fraud Study. In 2015, there were 13.1 million instances of fraud, which has now been widely accepted as a ‘normal’ part of doing business. However, despite incorporating severe security measures into their systems, banks and credit-card companies are still being hacked on a regular basis.
Fraud prevention measures are evolving constantly as fraudsters find innovative ways to access online data. Increased security is developed to combat the threat, including “biometrics, artificial intelligence (AI) or even blockchain. Banks have an opportunity to increase transparency, deepen their insights and enhance security to minimize fraudulent activity.”
Biometrics has so far been one of the most effective security measures put in place to combat banking fraud. The past few years have marked a significant shift across card and digital payments technologies. According to Javelin, “the US Payments Forum found that 29% of US merchants have enabled EMV (Europay, MasterCard and Visa) chip-card technology, and almost 75% of consumers have at least one EMV card. However, the migration to EMV in the US drove a 113% increase in new account fraud, which represents 20% of all fraud.”
International banker states that US banks really need to think about their vulnerabilities. In the United Kingdom, EMV fraud is not so much a problem because British banks incorporated an extra layer of security with the chip and PIN model, which requires a four-digit identification number along with the chip/credit card. Experts say that if US banks added an extra layer of authentication such as a PIN or digital fingerprint on the EMV chip, they would experience less fraud.
For using the likes of Apple Pay, where you touch your phone on the payment point to approve funds, biometric hardware is even more important. Finger print scanning or even eye scans have been included on some devices to allow access to payments. Biometrics are even advancing to the point at which after users sign-on with physical biometric authentication, companies can use behavioral biometric authentication to detect fraud.
Blockchain software is also an effective way of preventing fraud, but can also lead to delays in transaction times and frustration for customers. Blockchain is currently evident in Bitcoin transactions, and the online currency is trying to revamp procedures to reduce the problems blockchain causes.
However, blockchain is a win-win for larger corporations and huge banking transactions. It can eliminate online bank fraud for 100% of the transactions that occur on the chain by providing complete transaction history and security to all members of the chain.
Artificial Intelligence is also making a bold impact on online security. Money laundering has become a huge challenge for banks, dirty money puts all their activities at risk.
Banks are using data science, artificial intelligence that uses algorithms to analyze data, on spending patterns to identify activity that is consistent with money laundering and fraud, to weed out the bad seeds.
Other measures put in place are increased online security measures, including firewalls and encryption, and super-routers that are blocking entry at the source.
It has become clear that online security is evolving all the time, as are the methods used by hackers to gain access to sensitive data. Cyber security conferences up and down the country are constantly looking at ways of tackling online bank fraud, and banks and credit-card companies are doing all they can to protect their businesses, but most importantly their customers.