Instant payments and the evolution of counter-fraud strategies

What were your observations in terms of fraud and financial crime trends in 2023? Additionally, what are the projected fraud and financial crime trends for the year 2024, and how can financial institutions prepare to address these challenges?

The year 2023 has seen several significant developments in the field of fraud and financial crime, such as:

• Boiler-room (investment) fraud
• Bank helpdesk fraud 
• Dating fraud

These three social-engineering fraud types collectively accounted for 40% of reported fraud cases. 

When assessing financial damage, a slightly different picture emerges. The top three fraud types causing client financial damage were:

• Boiler-room fraud
• Dating fraud
• Invoice fraud

Together, these three types constituted two-thirds of the total client damage.

3. Faster Payments: The real-time payments scene has kept changing, driven by the incorporation of payments products into almost any kind of customer experience.

As we look forward to 2024, I think we will witness a faster pace of the trends mentioned above. Moreover, we will see more regulations, which means financial institutions have to be flexible to adapt to the changing compliance demands. To get ready, financial institutions should focus on technology spending, encourage cross-sector cooperation, and keep up with emerging risks.

In what ways do instant payments introduce new counter-fraud challenges, and what strategies can banks implement to mitigate these risks effectively?

The financial world has changed dramatically with the advent of instant payments, but this also poses new challenges for preventing fraud. Instant payments are done in seconds and cannot be reversed (PSD2), so they can only be stopped as they happen.

Not only that, but the number of transactions is also rising, which means fraud detection systems have to be able to cope with that.

It is also harder to check if a customer is who they say they are, because of the short time window and the use of sophisticated technologies like deepfakes.

Which technologies are available for banks to enhance real-time counter-fraud measures, and how can these technologies be integrated into existing systems for optimal efficiency?

What are the key challenges in developing real-time analytics for fraud detection, and what innovative approaches can financial institutions adopt to overcome these obstacles?

Developing real-time analytics is very complex. Some key challenges are:

• Speed Real-time analytics require processing vast amounts of data within milliseconds. Any delay can lead to missed fraudulent transactions. 
• Variety of data: Financial data is diverse, coming from multiple channels (ATMs, mobile apps, online banking). This means there is not a once size fits all solution. Banks need to implement robust data pipelines and combine AI with human expertise for effective investigation and decision-making
• Increasing legislation: The introduction of new privacy legislation like GDPR and PSD3 create uncertainty of how data can be used to reduce the number of fraud victims. 

How can the financial industry foster collaboration among banks to build collective intelligence for combating fraud, and what additional measures can be taken to strengthen this collaborative effort?

We are a financial institution that communicates regularly with regulators and urges them to foster data sharing frameworks, set standards, and reward cooperation.

Cooperation is essential in the fight against fraud in the financial sector. By exchanging information about the (new) methods and actors of fraud, we can support each other, as all banks share the same objective.

As we said before, cross-industry cooperation is vital, as banks partner with telecommunication companies, retailers, and technology providers. Shared insights can improve risk evaluation and quicker fraud detection.

We, as banks, need to help our customers defend themselves as much as they can. Rabobank offers secure products, and we do our part to ensure our customer’s safety where they can’t. We actively appeal to relevant parties to play their part in preventing fraud.

About Anton Jan Cozijnsen

With 25 years of experience in Rabobank, Anton Jan Cozijnsen is an experienced leader in banking who studied applied mathematics. He has achieved tangible results in fighting banking fraud and is currently working with his teams on next-gen fraud detection.

About Rabobank

Rabobank is a cooperative bank. Together with our stakeholders, we have been dedicated to creating a future-proof society and tackling major societal challenges for 125 years. In the Netherlands, we serve 8.3M retail and 0.8M corporate customers, globally we focus on the food and agriculture sector.