Why Credit Unions Should Integrate With an Omnichannel Fraud Solution
The battle against fraud in this ever-changing digital world is endless. There is this so-called “squeeze a balloon effectin the field of inter-financial institution fraud — and credit unions are no exception.
In the global landscape, financial institutions, including credit unions, must expect the unexpected. The battle against fraud in this ever-changing digital world is endless. Fraudsters continue to innovate and find new ways to hook up and they turn to using multiple channels and sophisticated fraud schemes. Credit unions that focus on single-channel fraud prevention efforts put themselves at risk…it’s kind of like when you push or squeeze a balloon and the air moves from one area to one other. This is an analogy to the ever-changing pressures when sophisticated fraud attempts overtake reactive prevention measures and unequal governance frameworks, consequently producing destabilizing consequences. In other words, they are vulnerable elsewhere.
McKinsey reports that the global fraud incident has skyrocketed and is expected to be close to $44 billion by 2025. The report cites a major US bank, as an example, which suffered above the industry average due to its highly fragmented fraud and compliance processes across an organization. Its technology systems were scattered across lines of business, resulting in a lack of a comprehensive customer view across all channels. It was therefore difficult to assess losses and attempted fraud. Although identity theft has been move from card skimming to account takeoversfinancial organizations have recently faced synthetic identity fraud cases with a cost $24 million in COVID-19 relief money.
Understand how fraud works
The battle against fraud in this ever-changing digital world is endless. Fraudsters continue to innovate and find new ways to hook up and they turn to using multiple channels and sophisticated fraud schemes. Credit unions that focus on single channel fraud prevention efforts are putting themselves at risk. It will also help them shape their approach to managing fraud. After all, the digital evolution has made new digital channels available to customers and members, as well as fraudsters.
Higher fraud rates have been observed among payment channels such as mobile payments. Today’s cyberattacks are often initiated by malware, which goes undetected for long periods of time before being activated. The means by which criminals can steal credentials have become smarter and even more compelling than ever. On February 15, credit union with more than 1 million members warns of surge in scams targeting local customers. The credit union has suffered nearly $1 million in fraud attempts in the past two weeks alone.
Social networks have become a way for fraudsters to recruit and collaborate with each other. Identity thefts have exploited these channels to steal the personal information of credit union members using advanced technologies. “For as little as $150, anyone can go and buy a very effective code to hacksaid Dayne Myers, vice president of solutions at McKinsey’s Silicon Valley office.
Sometimes even legitimate members of a credit union can commit fraud. By pretending to be a victim of identity theft to evade loans they cannot afford, the victim becomes the fraudster, and the fraudster is within the institution. This is called “credit washing”, another type of fraud.
As bad as it sounds, as financial institutions focus on hardening one vulnerability, cybercriminals are finding new areas of weakness.
Zero vulnerability with omnichannel fraud solution
Leading financial companies are adopting digital approaches to implement a comprehensive omnichannel fraud solution that is integrated across the organization and throughout the member journey. An omnichannel fraud solution is designed to improve the efficiency of fraud investigations, which is important for preventing fraud.
Ideally, an omnichannel fraud solution is integrated across all lines of business and all channels of interaction, be it branch, phone, online web or mobile, etc. With such advanced integration across multiple channels, an omnichannel fraud solution is designed to provide credit unions with visual monitoring, advanced analytics, and real-time alerts from unified data feeds to guide credit unions in their investigation and decision-making process. And this process is crucial. Very crucial. From a global point of view, it allows investigators to have an in-depth view of the behaviors of their members, leaving no loopholes in fraud investigations.
An omnichannel anti-fraud solution is also designed to quickly present relevant information to the credit union investigator and allow it to be easily understood. This can speed up the investigation process and avoid false positives for non-fraudulent cases.
Additionally, there are sophisticated omnichannel solutions that enable configurable process automation. This means that the omnichannel solution can detect process waste, examine performance variations, help identify points where transfers may be limited and enable collaboration within the organization with a very strong and immutable audit trail. .
For financial institutions, these capabilities are critical to navigating the ever-changing fraud landscape. They help increase speed, reliability, and accuracy while minimizing costs and errors, which translates to better customer satisfaction and improved organizational integrity.