Everything we used to buy in physical stores is now available online. There’s no denying that the world has moved towards the digitalization of consumer goods and services. Online services provide endless options, home delivery, easy returns, and many other benefits. However, it also brings in challenges related to scams and frauds. The number of financial frauds with online transactions has been rising constantly in the last few years.
While technology is the leading cause of increasing fraud, it is also the solution. Many fintech companies worldwide use Artificial Intelligence (AI) to combat digital fraud. Here’s how the revolutionary technology is helping them detect and tackle fraud.
Preventing Synthetic Identity Fraud
Creating synthetic identities is one of the fastest-growing digital scams. Fraudsters use accurate information and blend it with fake details to create synthetic identities. They use these identities to apply for loans and then disappear without a trace.
AI-enabled identity verification solutions can help detect synthetic identity fraud. These solutions use deep learning neural networks to scan and analyze real-time images. They match the details with biometrics to identify synthetic identities.
Moreover, these solutions have several other authentication layers that are effective in preventing fraudulent activities. For instance, the forensic identity solution we found at AU10TIX had a ten-layer verification process. It blended AI, biometrics, and Near-Field Communication (NFC) technology.
These solutions work by capturing consumers’ images in real-time. The NFC technology confirms if it is a real-time image. After the confirmation, the solution scans the image with the help of deep learning capabilities and matches the information with biometrics.
With the combination of all these technologies, the identity verification solution could authenticate identities within a few seconds.
Detecting Fraud to Stop Money Laundering
Money laundering is an awful crime prevalent in many jurisdictions. Fraudsters try to change the source of money obtained from a crime to a legitimate one. Traditionally, we had to rely on humans for detecting money laundering. However, as the data increases, humans can no longer identify all the scams. AI’s capability to analyze a large chunk of data proves helpful here.
AI-based algorithms can monitor transactions to detect any changing patterns. For instance, they can pull different kinds of data like transaction initiation, who initiated it, destination account, etc.
With all data in a single place, AI solutions can analyze it to detect deviations from usual behavior. For instance, they can identify a sudden spike in transactions at unexpected times to alert fraud. Besides the money laundering fraud, AI solutions can also determine if the transaction is genuine and made by the account holder.
Strengthening Cybersecurity With AI
Cyberattacks have constantly been rising since the pandemic. Today, no organization or individual is safe. The remote workforce norm and increasing chaos due to the pandemic have created the perfect bait for adversaries.
The only way to mitigate cyber risks is by taking a proactive detection approach. Cybercriminals have to go through an attack chain cycle to deploy an attack. If you can identify the threat before the hacker completes the chain, you can prevent significant attacks.
AI can constantly monitor your IT infrastructure to detect deviations in the security protocol to alert the cybersecurity team. Additionally, AI can integrate data from multiple sources to provide a single pane of glass view. You can use this to generate actionable insights that can help prevent cyber breaches.
Stoping Accounts Payable Frauds
Since accounts payable teams work in finance, they are a common target for criminals. Most companies work with multiple vendors. Inspection is usually ignored once trust is built between the company and vendors. These gaps in the inspection process allow the fraudsters who get in the middle of the two parties and use fake invoices to commit scams.
Another common fraud in the accounts payable department is overcharging. Vendors try to increase the bill amount by charging for the goods and services they didn’t provide.
Since manually inspecting all the transactions is hectic, the chances of such crimes are ignored. AI can automatically monitor all the transactions without human intervention to overcome this challenge.
Let’s consider an example of a warehouse to understand this better. Suppose a vendor delivers a large consignment to a warehouse. Manually counting all the products is prone to errors.
Using deep learning’s image processing capabilities, you can create AI algorithms to scan and count the items in the consignment, reducing errors. You can also cross-check the numbers to verify everything is correct.
Conclusion
AI is capable of eliminating fraud from the root. Several such AI-powered solutions are currently under development. It will be thrilling to watch how these solutions unfold to mitigate fraud.
Interesting Related Article: “Can You Buy Insurance Against Cyberattacks? Yes — Here’s How”