Artificial intelligence is a technology that we might have only heard about in movies and news. The technology is so sophisticated that it can perform tasks at better efficiency than humans. It is not just performing the task but learning to make it better. The technology is now helping banking sector in fraud prevention.
Some of the common AI usages we are familiar with are artificial assistance in our smartphones like Siri, Bixby, Alexa. The auto-drive in luxury cars are also using artificial intelligence for successfully driving on the road. The technology has many other uses.
Artificial intelligence is a term that people were unfamiliar with a decade ago. However, in recent years, the technology has spread its uses in different sectors and gained much popularity in the financial sector. AI mimics human intelligence to perform tasks and it learns to improve itself.
Fraud Impact on Global Economy
The purpose of technology is to help us make our life and tasks easy but there are people who use it for the wrong purposes. Fraudsters and scammers have always been making business and customer life hard and making us lose our money. Digitalization has allowed businesses to shift online and it also moved fraudsters online to steal our money.
Fraud and scam have reported the loss of 2 Trillion US dollars in the year 2019. But the officials say that these numbers can be increased if they are not stopped. Ever since the pandemic, the fraud report is on the rise because of the increase in online business. The financial sector, however, has experienced this threat the most.
The financial sector consists of a large amount of money in comparison to the commercial sector. This attracts fraudsters as they view great rewards associated with this. Research has reported the loss of 600 billion US dollars in the global market due to financial cybercrimes.
Cybercrime in Financial Sector
The Financial Sector has been finding ways and developing systems to prevent these threats and protect their businesses. AI-based KYC verification is in use for fraud prevention. Fraudsters are taking the help of advanced AI to commit cybercrime. The increase in ATO frauds, phishing mail, and credit debit card fraud has caused millions of losses.
ATO fraud stands for account takeover fraud which is when a hacker gets access to the owner’s account and uses it for desirable purposes. Customers lose their savings when hackers get access to the account holder’s bank account.
Phishing mail is those scams emails we receive that provide us false information to trap us into providing personal information. They consist of links and the email desires us to click on the link. This can allow hackers to access the account holder system and do whatever he wants.
Debit/Credit frauds have been here ever since the introduction of credit cards. Fraudsters use card information to purchase or steal from customers.
Artificial Intelligence Usage in Financial Sector
Businesses are developing systems to fight against fraud. Because fraudsters are using advanced tech, businesses are also forming AI against them. If the AI is causing harm then it can also protect them.
The financial sector requires to perform Know Your Customer (KYC) verification while onboarding an end-user. This practice allows them to verify the identity of an individual.
Know Your Customer
The modern digital world has allowed people to perform their tasks online. Businesses are now conducting their businesses online and consumers are purchasing products through online mediums. However, the risk of online fraud is also associated with this.
Businesses are required to perform KYC verification while onboarding customers. It allows businesses to understand if the customer is authentic or a threat.
In the financial sector, KYC is done through document verification. In document verification, customers are asked for personal documents for verification. These documents usually consist of ID card, social security number, debit/credit card information, and some others. These documents are verified through AI-based KYC verification that scans these documents and runs them through the system. The AI algorithm checks the authenticity of documents.
Know Your Transaction
Most frauds happen because of a lack of transaction monitoring. Whenever a bank account gets hacked, the hacker first transfers the amount or withdraws it. Because there is no monitoring of transactions, hackers are successful in doing it.
Banks must monitor whenever there is a huge transaction of money. Know Your Transaction helps banks in identifying if the transaction is authentic. When the transaction is made by the account, KYT verification helps in identifying if the transaction was done by the owner or a fraud. Customer verification is done at the time of withdraw and transfer to eliminate any risk.
