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How technology can help businesses combat fraud over the festive season

With UK consumers set to spend £28 billion this festive season, the UK faces another significant surge in identity fraud. With online criminals looking out for more ways to exploit people’s information to commit fraud, financial service firms are under immense pressure to ensure their fraud-prevention systems are fit for purpose.

Recent legislation changes around fraud and scam reimbursement, brought in by the Payment Systems Regulator, also means that more than ever before, companies are looking to protect consumers online this Christmas.

Since 2021, fraud rates have increased by 21% during the festive period and in 2023, 83% of fraud cases leading up to Christmas were identity-related. Looking at this year, there was a 12.5% rise in identity fraud cases in the first six months of 2024.

However, leading companies are fighting back. By utilising the latest cutting-edge technology, including artificial intelligence (AI), and data sharing, companies are better placed than ever before to prevent fraud.

The role of Artificial Intelligence

To combat this growing threat, UK financial service firms are increasingly turning to AI and machine learning technologies. These advanced systems can analyse vast amounts of data in real-time, identifying patterns and anomalies that may indicate fraudulent activity.

The three most prevalent use cases are:

1.Real-Time Fraud Detection:  AI algorithms can monitor transactions as they occur, flagging suspicious activities for further investigation. This real-time analysis is crucial in preventing fraud before it happens, rather than reacting after the fact.

2. Behavioural AnalyticsBy analysing the behaviour of users, AI can detect deviations from normal patterns that may suggest fraudulent activity. For example, if someone’s spending habits suddenly change, the system can alert the financial institution to investigate further. Conversely companies are also using this logic to remove good customers from their referral queues and to reduce friction in the journey.

3.Identity Verification: AI-powered systems can enhance identity verification processes by cross-referencing user information with multiple data sources. This helps ensure that the person making a transaction is who they say they are.

 The role of Data Sharing

Data sharing plays a crucial role in preventing fraud by fostering collaboration and information exchange amongst everyone in the industry. It enables banks, insurance companies, and other financial firms to share data on fraudulent activities, suspicious transactions, and emerging threats in real-time, creating a robust mechanism against fraud.

 One of the main benefits of data sharing is the ability to identify and mitigate fraud patterns more effectively. By pooling data from multiple sources, financial institutions can detect anomalies and patterns that may indicate fraudulent activity. This allows for quicker identification of fraud schemes that might go unnoticed if companies were operating in isolation.

Moreover, data sharing enhances the speed and accuracy of fraud detection. When a suspicious transaction is flagged by one company, the information can be rapidly shared, alerting other members to potential threats.

Ultimately, the integration of AI and other advanced technologies has had a significant impact on fraud prevention in the UK. According to UK Finance, financial services companies prevented £710 million of unauthorised fraud in the first half of the year. This success is largely due to the sophisticated fraud-prevention technologies now in place.

 However, the fight against fraud is an ongoing battle. As criminals continue to develop new methods, everyone in the industry must remain vigilant and be proactive in updating their strategies. By doing so, they can rise to the challenge and protect consumers, especially during this festive season.

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This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.

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