Financial Crime World

Fighting Fraud: Banks Prioritize In-House Solutions Over Outsourcing

A recent study by PYMNTS Intelligence reveals that a majority of financial institutions (FIs) are opting for in-house solutions to combat fraud, rather than relying on third-party providers.

Investing in Technology

The survey found that 48% of FIs plan to add or have already added new technology systems in the next year to improve their anti-fraud efforts. Larger banks with assets totaling more than $100 billion were most likely to invest in these technologies, with 68% planning to do so within the next 12 months.

Effective Technologies

Machine learning (ML) and artificial intelligence (AI) were cited as the most effective technologies for combating fraud and mitigating losses. In fact, 56% of FIs with assets over $5 million reported plans to initiate or increase their use of ML and AI in their existing fraud solutions.

The study also found that outsourcing fraud detection and prevention to a third party is now the least popular option, with only small FIs (with assets under $5 billion) expressing interest in this approach. In contrast, larger banks are more likely to develop new in-house systems to combat fraud, with 46% of FIs with assets over $100 billion citing plans to do so.

Improved Communication: A Key Strategy

Improved communication with customers was also identified as a key strategy for combating fraud, with 62% of FIs planning to improve their communication efforts.

Key Findings

  • 48% of FIs plan to add or have already added new technology systems in the next year to improve their anti-fraud efforts.
  • Larger banks (with assets over $100 billion) were most likely to invest in these technologies, with 68% planning to do so within the next 12 months.
  • ML and AI were cited as the most effective technologies for combating fraud and mitigating losses.
  • Outsourcing fraud detection and prevention is now the least popular option, with only small FIs expressing interest in this approach.
  • Improved communication with customers was identified as a key strategy for combating fraud.

Conclusion

The fight against fraud requires innovative and effective strategies. As FIs face increasing challenges from data breaches, faster payment rails, and complex regulatory requirements, it’s clear that turning to in-house solutions is the way forward. By investing in ML and AI technologies and improving communication with customers, FIs can stay ahead of the game and protect their customers’ interests.