Companies Fight Fraud with Proactive Approach

A Shift from Reactive to Proactive Strategy

In the ongoing battle against fraud, companies are abandoning their reactive approach in favor of a proactive, customer-centric strategy. This new approach combines advanced technology, including artificial intelligence (AI) and machine learning (ML), with actionable analytics and a focus on delivering exceptional customer experiences.

Accurate Detection and Reduced False Positives

According to a recent survey by McKinsey, leading organizations are using machine-learning algorithms to detect fraud more accurately, while also reducing false positives and the risk of missing fraudulent transactions. For example:

• A Brazilian telco uses powerful algorithms and a sophisticated escalation approach to verify and authenticate risky transactions.
• Capital One’s Second Look flags certain transaction patterns, such as unusually high restaurant tips or duplicate transactions, and notifies customers.

Educating Customers and Enhancing Customer Experience

Companies are also investing in robust customer onboarding and authentication processes, which include iterative testing across numerous types of fraud checks. This helps to balance fraud control friction with customer experience, as customers value security and convenience differently. Additionally:

• Companies are implementing self-service options that allow customers to file disputes or check the status of a claim quickly and easily.
• Best-in-class institutions use fully automated dispute processes, with automated decision engines applying calibrated red flags and white flags.

Leveraging AI-Powered Tools

To further enhance the customer experience, organizations are using AI-powered tools to support investigation agents, such as determining the next-best action in fraud cases. Some companies are even collaborating with other industries, such as telecommunications, to detect and prevent fraud.

Delivering Exceptional Experiences

The key to success lies in delivering exceptional experiences across two critical customer journeys:

• False Positives: Companies must minimize friction and embarrassment by providing easy remediation paths.
• True Fraud: They must swiftly take care of customers and protect their accounts against future fraud.

The Importance of a Proactive Approach

Fighting fraud requires a top priority for CEOs across all industries. By adopting a proactive, customer-centric approach that combines advanced technology with actionable analytics, organizations can restore customer trust and loyalty while limiting the impact of fraud.

Next Steps

In the next article in this series, we will discuss four capabilities that will equip organizations to assess and address risks effectively:

• Enhanced threat intelligence
• Fast-cycle testing
• Advanced data and analytics capabilities
• Integrated operating model