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What’s The Best Approach To Modern Fraud Detection And Prevention?

What's The Best Approach To Modern Fraud Detection And Prevention?

CEO and Co-Founder of DataVisor, the leading fraud detection company with solutions powered by transformational AI technology.

Fraud is evolving at record speed. According to the FBI, there has been a 300% increase in reported cybercrimes since the pandemic started — and remote workers have caused a security breach in 20% of organizations.

The rise in cybercrime isn’t the only troubling aspect. With the trend toward adopting digital technologies and rapid innovation, the fraud landscape is expanding rapidly. Fraudsters attack organizations in numerous ways via malicious devices and emulators, phishing scams, account takeovers and more.

Protecting the enterprise from fraud and risk today requires robust solutions that evolve and adapt quickly. As fraud and risk teams recalibrate their solutions to respond to new fraud threats, the decision to overhaul versus upgrade existing technology to address new types of fraud looms large.

Upgrade Versus Overhaul

Organizations need a broad spectrum of capabilities — malware and bot detection, device identification, behavioral analytics and transaction monitoring — to fight the various types of fraud. Most organizations have added these capabilities as needed, resulting in piecemeal protection. Each time a new type of fraud poses a threat, the fraud and risk team evaluates and purchases a point solution to address it — hopefully implementing it before an attack occurs.

It seems reasonable to want to maximize your existing investments, and this approach has worked well in traditional business environments that were fairly static. But given today’s rapid pace of innovation, a reactive mode and bolting on point solutions together doesn’t always work.

Relying on point solutions means dealing with multiple vendors, all issuing upgrades and patches on an ongoing basis. Teams must constantly monitor the technology stack for outdated software, deal with integration issues and manage various service agreements. In this piecemeal environment, fraud solutions are siloed, meaning you can’t analyze fraud data across sources collectively for valuable insights. Worst of all, it takes time to evaluate, select and roll out a new solution. By the time you do, it may be too late.

Comparing The ROI

The incremental approach may initially seem like the most cost-effective and reasonable way to expand your fraud prevention capabilities. You may end up spending more time and money maintaining a fragmented infrastructure in the end, though, while missing out on cutting-edge technologies that are designed to protect account life cycle activities and can adapt to evolving threats as they emerge.

As an analogy: Suppose you’re upgrading your home entertainment system. Your existing TV doesn’t have built-in streaming, but you want to access streaming services like Netflix. You want better sound. You buy a streaming box and hook it up to your old TV, connect a soundbar, your old gaming console and avoid the cost of replacing your current TV.

Six months later, your streaming box has a technical issue, so you have to replace it. The new version isn’t compatible with your old TV. A new game comes out that your current console doesn’t support. If you had spent a little more money upfront to purchase a new TV with built-in features, you wouldn’t be spending money and time trying to locate point solutions to work with your current setup.

The same holds true for fraud prevention. Investing in a cutting-edge platform that can scale to meet your needs over time could provide better long-term ROI while enabling you to take a proactive approach and get ahead of the evolving fraud landscape.

Out With The Old, In With The New

With attack patterns and vectors continually evolving to exploit your vulnerabilities, it’s important to set up your organization with a solution that will grow and adapt. A few more good reasons to abandon your piecemeal legacy fraud solutions and take a more aggressive approach:

• Digital transformation has accelerated. Thanks to the pandemic, most organizations are innovating on new features and adopting new technologies at an unprecedented pace.

The heightened focus on data. Comprehensive fraud and risk platforms that centralize data from multiple sources can provide invaluable insights to enable real-time detection and prevention.

• The SaaS factor. Lengthy implementations are typical when rolling out new technology. Fortunately, new platforms are often SaaS-based, which dramatically reduces implementation time and hassle.

• Global data and experience. The latest fraud and risk solutions offer AI-powered detection and out-of-the-box features that leverage global fraud data, providing advanced protection upon implementation.

• Lower TCO. With an incremental approach, business units provide their own solutions, resulting in silos and the inability to share data across systems. A shared infrastructure lowers the total cost of ownership.

However, there can be challenges with the overhaul approach. Migrating existing defenses to a new platform all at once is not always viable, and the old and new systems may have to coexist for a while. In the short term, this might temporarily increase operational overhead. There’s also a learning curve when new systems are introduced, and formal training may be necessary. Finally, fraud leaders have to navigate organizational buy-in and user adoption. This requires engaging teams early on to identify potential pitfalls during implementation and create familiarity with the new approach to improve the chance of widespread adoption.

An incremental approach may be preferable if you have already upgraded some of your defense systems, or if you have a strong in-house team and dedicated IT support to help with gradual system upgrades.

Creating Competitive Advantage

Taking an aggressive approach to fraud and risk prevention can lead to competitive advantage. Asia’s rapid adoption of mobile payments is a perfect example. Before moving to mobile, China’s banks were behind those in western countries in technology adoption. They were in an ideal situation to abandon legacy solutions and leapfrog ahead to the latest technologies — and they did. Today, in China, few people pay with cash, and credit cards are not used as widely; they use their phones, enhancing user experience and convenience.

Similarly, as fraud continues to evolve, businesses that invest in the newest technologies will be better positioned to keep pace with the changing face of fraud now and in the years to come.

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