Share Data to Fight Fraud

CU360
March 23, 2009 | COMMENTS

Reducing fraud at all levels of a financial institution depends on collecting high quality data and examining it with sophisticated analysis. While many organizations have isolated solutions to help them identify potential fraud within a specific delivery channel or transaction type, the ideal solution is to make stolen consumer information completely useless to a would-be fraudster.

The key to this strategy is to gain access to as much information as possible about consumers and their financial behavior, according to Kay Nichols, executive vice president of Fidelity National Information Services.

By accessing and leveraging data from all the various products and services an institution offers, staff can run analytics on legitimate consumer activity to help distinguish it from fraudulent behavior.

A wealth of consumer behavior information exists within the confines of a financial institution, says Nichols. Proprietary data drawn from checking, debit, and credit card systems is essential to accurately profile consumer behavior. For instance, knowing how frequently an account holder uses an ATM out of network or how often a debit card is used at a retail location helps financial institutions sharpen their view of normal consumer behavior while making it easier to flag potential fraud. This data is essential for the analytical models that identify customer-behavior patterns.

By expanding the range of internal member data that's available for evaluation, institutions can reduce their exposure to fraud and better protect their consumers. Still, a fraud prevention program can be strengthened when data from trusted outside sources is integrated with internal data to create an even deeper view of the consumer. Indeed, when financial institutions collaborate by sharing information—fraud hot lists or velocity alerts of key behaviors—it benefits all participants.

External Data

External debit bureau databases contain billions of consumer records that financial institutions have been contributing to for years. Sharing fraud and behavior data through a common warehouse is one option, but financial institutions must make sure they're in compliance with applicable consumer regulations and that this consumer data is used only for agreed upon purposes. This allows institutions to integrate external consumer records with their internal data to create a sharper picture of consumer behavior.

Many financial institutions have already joined together to collaborate against fraud, and for good reason. Every three seconds someone's identity is stolen, leaving financial institutions to deal with charge-offs, angry consumers, and maybe even damage to your credit union's reputation.

By collaborating, financial institutions can do together what they can't do alone: stop fraud. They can also show consumers they truly understand them, giving institutions the ability to build greater customer loyalty and increase wallet share.