Combatting fraud – insights from industry experts
In the rapidly evolving finance industry, fraud remains a persistent and escalating challenge. As fraudsters develop more sophisticated methods, the industry must continuously innovate and collaborate to protect systems and customers. However, I have been trying to understand experiences outside of finance. How are other sectors looking to tackle the issue?
How are various sectors looking to tackle the issue of fraud?
Luckily for me, a recent panel discussion at the Reflect Festival in Cyprus featured experts from several industries. They discussed current fraud trends in their respective sectors, technological solutions, and the importance of cross-industry collaboration.
The panellists were Elena Emelyanova, a senior payments and fraud manager at Wargaming; Felix Efren Gonzalez Reyes, fraud analyst at mobility app Bolt; Michael Ioannides, Visa country manager for Cyprus; Andre Moeller from Elli, a brand of the Volkswagen company; and Oleg Stefanets, chief risk officer, Payabl.
It was a brilliant panel, and it was truly fascinating to hear perspectives from various industries and consider applications to the finance industry.
Motivations for fraud
The panel kicked off with a question about motivations for fraud. It turns out it is not just about the money! For example, the gaming industry has always faced significant challenges, with motivations varying wildly.
Emelyanova from Wargaming explained that as gaming traffic surged during the COVID-19 pandemic, so did fraudulent activities. Fraudsters exploited the increased activity, leading to a rise in promotional abuse (i.e. creating multiple accounts to claim rewards), credential stuffing (using leaked credentials from other breaches), and account takeovers.
She discussed the various motivations behind these actions. Often, it is for status or access to privileged levels. She recounted an instance where a fraudster was hacking other users’ accounts. When they finally caught him, he demanded a “Press Account”, granting access to the latest items and features in exchange for ceasing his activities. Elena estimated he was probably 15 years old. He did not want money!
Fraud also manifests uniquely in the micro-mobility and car-sharing sectors. Reyes from Bolt noted that teenagers often fraudulently hire scooters and cars and misuse them, not for financial gain but for the thrill of hacking the system and joyriding.
AI and fraud
The fight against fraud is increasingly reliant on advanced technologies. Machine learning, though not a new concept, has become integral in fraud detection. Traditional machine learning models, often seen as “black boxes”, are now evolving into hybrid models. These models combine rules-based systems with machine learning components, providing more transparency and effectiveness. Emelyanova shared that Wargaming successfully implemented such a hybrid model, leading to significant improvements in fraud prevention.
Talking about how Payabl helps merchants fight fraud, Stefanets said: “One of our main strategies involves using advanced risk management tools, including machine learning, to identify patterns and anomalies in transaction data. This helps us prevent fraud by spotting data trends, which means we can detect potentially fraudulent behaviour early on, which is more accurate than traditional methods.”
While AI is a powerful tool for combating fraud, fraudsters also successfully leverage it. Reyes explained the constant cat-and-mouse game between fraud prevention teams and fraudsters using AI to generate fake IDs and bypass security measures.
The panel agreed that one of the challenges across their industries is to stay one step ahead by continuously updating, refining, and harnessing AI capabilities while focusing effort and budget on researching and understanding emerging use cases employed by fraudsters.
The power of collaboration
Effective fraud prevention requires more than just advanced technology; it necessitates robust collaboration across industries. Moeller from Elli highlighted the importance of sharing information about fraudsters between companies and working together to combat common threats. Other panellists echoed this sentiment, emphasising the need for a united front against fraudsters who freely share hacking techniques within their communities.
Stefanets talked about collaboration with customers, saying that Payabl assists merchants in complying with regulatory requirements, guiding them through intricate compliance processes, and helping them adjust to new regulations.
Ioannides from Visa stressed the significance of cross-industry cooperation and the role of governmental authorities in tackling fraud. He shared a case where a coordinated global effort stopped a major fraud attempt in just 32 minutes, demonstrating the incredible power of collaboration.
Impact of fraud on the consumer
Ioannides also discussed research showing that victims of financial fraud become more reticent about using cards online. A staggering 91.6% of people have an adverse reaction, and 7% choose to disengage from online commerce altogether. The impact on human psychology is often overlooked, but understandably, victims become much more cautious.
Visa’s innovations and industry leadership
As one of global payment leaders, Visa has made substantial investments in cybersecurity, spending over $10 billion in the last three years. The company supports over 41 billion transactions daily and employs advanced systems to detect and prevent fraud.
One of the critical technologies Visa utilises is tokenisation. Ioannides explained that tokenisation, which replaces sensitive payment information with a secure token, has been instrumental in reducing fraud across both online and offline transactions. Visa’s click-to-pay system, built on tokenisation, aims to provide consumers a seamless yet secure payment experience.
Data as a weapon against fraud
Data is a powerful weapon in the fight against fraud.
Payment solutions providers can offer detailed reporting capabilities to its merchants, such as comprehensive dashboards that offer visibility into transaction data, including sales volumes, chargebacks, and instances of fraud.
This empowers customers to make informed decisions and take timely actions to mitigate fraud risks.
Future directions in fraud prevention
All industries must continue to innovate and adapt to emerging threats. The panellists agreed that ongoing improvements in machine learning, AI, and tokenisation are essential. Collaboration will remain a cornerstone of effective fraud prevention as industry players work together to outpace fraudsters.
In conclusion, the battle against fraud is a dynamic and continuous effort. The industry participants are voicing their commitment to safeguarding the integrity of financial transactions through technological innovation, strategic collaboration, and relentless vigilance.
The insights these experts shared highlight the importance of staying ahead of the curve in the ever-evolving landscape of fraud prevention.
About the author
Dave Wallace is a user experience and marketing professional who has spent the last 30 years helping financial services companies design, launch and evolve digital customer experiences.
He is a passionate customer advocate and champion and a successful entrepreneur.
Follow him on X at @davejvwallace and connect with him on LinkedIn.
