Fraud Protection Improvements Needed as Online Banking Gains Popularity

Most US bank customers prefer to do their banking online compared to any other method, according to an annual survey of 1000 consumers conducted by the American Bankers Association. The study found that online banking is gaining in popularity year after year – 36 percent of this year's consumer sample voted in favor of Web banking, compared to 25 percent last year.

 

Survey results showed that the popularity of online banking was not exclusive to the youngest consumers: it was the preferred banking method for all bank customers under the age of 55. Consumers over 55 still prefer to visit their local branch (33 percent). Online banking for this age group was the second favorite way to conduct banking transactions (20 percent).

 

But with the popularity of online banking on the rise with both consumers and businesses, so is the risk for greater banking fraud. Recently,US authorities charged more than 70 people accused of using the infamous Zeus Trojan to steal more than $3 million from online bank accounts. The US crackdown comes days after police in London arrested 19 people in connection with the Zeus-aided theft of millions of pounds. Of these, 11 - all from Eastern Europe - have been charged.

 

According to the US federal complaints, the cyber-attacks began in Eastern Europe, with the crooks using malware, including Zeus, to siphon off millions of dollars from accounts. The malware was typically sent as an apparently-benign e-mail to computers at small businesses and municipalities. Once opened, the malware embedded itself in the victims' computers, enabling the fraudsters to make unauthorized transfers of thousands of dollars at a time to mule accounts controlled by the co-conspirators.

 

This example illustrates why it is so critical for banks to constantly evolve and update their fraud prevention and detection systems for all online banking accounts.

 

Banks can mitigate online banking threats by taking a layered approach to online banking fraud monitoring. Analyzing all together the login event, the outgoing transaction and the sequences of events relative to usual customer behavior is a strong predictor of criminal intent patterns. Through this event monitoring and customer behavior profiling, high-risk activity can be detected, and action can be taken in real-time or near real-time to stop the transfer of funds from the account or to contact the customer to confirm that the transaction is genuine, and thus avoiding any loss to the bank or consumer.

 

But real-time protection is only one piece of the puzzle. The other piece is to approach fraud detection and protection as a customer relations strategy; one which improves account holder security throughout the banking operation. The benefits of building an enterprise platform on top of what may begin as a stand-alone debit card fraud program are many.

 

For example, when a bank’s systems look across broader bank-customer channels it may uncover suspicious activity that would have appeared normal if viewed independently. There are many cross-channel fraud scenarios that fraudsters use to target banks. Such connections can be easily missed when each function has its own specific approach and methodology to fraud. But to get to the level where a bank can effectively detect suspicious cross-channel activity requires an underlying platform that has the flexibility to understand card, internet banking, wire, ACH and other data sets, both financial and non-financial across all channels.

 

The speed and cunning of online banking fraud demands a real-time, 360-degree response.