Artificial intelligence (AI) has many compelling business use cases. Two of the rapidly emerging reasons why businesses use AI are to detect and deter fraud. A study carried out in partnership with the Association of Certified Fraud Examiners (ACFE) and analytics company SAS.
This study, titled “Anti-Fraud Technology Benchmarking Report,” was the first of its kind. It polled more than 1,000 ACFE members from across industries and around the world. The goal was to find out how the members’ employers used AI to decrease fraud.
A Growing Commitment to AI
One of the most interesting findings from the study was that only 13% are using AI for that purpose now, but another 25% plan to start doing so within two years. That difference represents nearly a 200% increase. If the projections from the study come to pass, they show a definitive conclusion that companies are embracing AI for fraud detection.
That’s not surprising considering the benefits that AI could bring to the daunting but necessary task of fraud detection. The advanced nature of the algorithms used to allow companies to become aware of things they’d otherwise miss. For example, AI can figure out if an interaction with a company doesn’t fit the characteristics of typical transactions.
Doing that requires examining numerous characteristics in a matter of seconds — something humans can’t do. Some kinds of AI can also detect various types of fraud without previous exposure to them. Such an advantage keeps businesses’ systems more up to date and able to tackle the latest threats.
Companies Are Diversifying Their Strategies in Other Ways
The survey also showed that 55% of companies planned to devote larger portions of their budgets to anti-fraud technology over the next two years. Doing that, in some cases, means depending on biometrics as part of fighting fraud. Approximately one in four organizations are already using biometrics technology for fraud-detection purposes, with 16% anticipating that they’ll start using biometrics by 2021.
Enterprises are interested in altering the ways they analyze data, too. Automation will be a substantial point of focus, with 72% of organizations planning to use automated monitoring, anomaly detection and exception reporting by 2021. That strategy will likely help them save time and avoid false alarms.
Respondents expected upticks in the percentage of enterprises using predictive analytics/predictive modeling and data visualization, too. The results showed that 52% plan to use modeling and predictive analytics (an increase of 22%), while 47% believe their companies will use data visualization (a 12% rise).
Predictive analytics, in particular, could help companies learn what kinds of threats are most likely to impact their businesses. The tricky thing about fraud is that the various methods used tend to have some shared characteristics, but scammers continually use new tactics that differ depending on the situation
For example, lottery scammers often use a false sense of urgency to encourage victims to take action and provide sensitive details. In contrast, people who carry out fraud at a retail establishment, for example, may work at a slower pace and gradually try to hurt the business with unnecessary returns or fraudulent transactions that start small and get larger.
Some Brands Are Already Using AI as a Fraud Deterrent
The survey analyzed above largely dealt with whether companies may use AI to minimize fraud soon. After all, a greater percentage of the respondents expected to do that within a couple of years compared to the respondents utilizing the technology now.
Some companies are already using AI to detect fraud, though. The option is particularly popular in the banking sector. In one example, Danske Bank uses an AI platform that scores credit card, online and mobile transactions in less than 300 milliseconds. The score relates to the likelihood of fraud for a given sale. That impressive speed highlights why it’s so appealing to companies to depend on AI.
Also, Mastercard relies on its AI fraud detection to serve two purposes. The first is to cut down on fraudulent transactions, and the second is to reduce the number of times that customers experience declined transactions when nothing’s wrong. Mastercard’s technology can reduce the rate of incorrectly declined transactions by 50%.
People typically feel embarrassed when their cards decline as they try to pay for things. Some may even feel less loyal to the card provider after those instances happen. Mastercard’s use of AI could stop the company from losing money due to fraud, plus keep customers happier.
An Essential, Capable Technology
The number of interactions that customers have with businesses daily means advanced fraud detection is crucial. AI is proving its worth already, and it will likely continue to do so as technological improvements happen.
Written by Kayla Matthews, Productivity Bytes.