Risk never sleeps. As businesses and consumers increasingly shift to online platforms, the sophistication and frequency of fraud attacks have grown in tandem—highlighting the increased need for businesses to work together to build safer digital experiences that everyone can trust.
In a new events series, Sift and About Fraud brought together industry professionals at multiple in-person Risk Revenue Forum sessions throughout the first half of the year to discuss the emerging trends, disruptive technologies, and adaptive strategies defining fraud prevention today. From Los Angeles to London, we collected invaluable insights about the current landscape of fraud, highlighting the critical role of AI as both a facilitator and a frustration, the importance of proactive security, and why robust regulatory frameworks matter now more than ever.
The forums covered a broad spectrum of topics relevant to any business betting on digital, with deep discussion on what leaders need to do now to transform today’s threats into tomorrow’s growth. Here’s what we learned.
Will AI ever be able to make fraud prevention decisions that can be trusted to run without human intervention, and if so, when?
While AI technology in fraud prevention has made significant strides, achieving a system that can run entirely without human oversight remains a distant goal. AI can identify patterns and flag potential fraudulent activities much faster and more accurately than humans. However, the dynamic and evolving nature of fraud means that human intuition and decision-making are still crucial. Fraudsters continuously adapt, finding new ways to exploit systems, and while AI can learn from these patterns, it requires constant updates and training that benefit from human expertise. Embracing any opportunity to be proactive is essential. In the foreseeable future, the most effective approach will likely be a hybrid system where AI handles the bulk of detection and analysis, but human intervention remains vital for nuanced decisions and adapting to new threats.
Who is better resourced to achieve their goals, fraud actors or fraud fighters?
In terms of technology, both sides might appear equally resourced, but the playing field is far from level. Fraudsters benefit from a lack of constraints and regulations, allowing them to operate with greater flexibility and agility. They can quickly adapt to new technologies and methodologies without the ethical and legal limitations faced by legitimate businesses. On the other hand, the fraud ecosystem itself is fraught with mistrust, as fraudsters often deceive one another. For businesses, the key advantage lies in leveraging sophisticated technologies, robust legal frameworks, and collaborative efforts across industries to stay ahead of these bad actors. Understanding the broader societal implications and being proactive in networking and industry education can significantly bolster the resources and capabilities of the “good guys.”
Is fraud a bigger problem in the private or public sector?
Fraud is pervasive in both sectors, but it manifests differently due to varying regulatory landscapes. In the private sector, businesses are constantly innovating to protect themselves against fraud, driven by direct financial losses and reputational damage. The public sector, however, deals with fraud on a broader societal scale, often involving larger, more complex schemes that target government programs and public funds. Both sectors face significant challenges, but the nature and impact of fraud can vary greatly depending on the regulatory environment and the types of assets at risk. The increasing importance of regulation in an online world underscores the need for comprehensive legislative measures to protect both sectors.
How will the upcoming requirement to reimburse victims of APP fraud affect fraud prevention?
The new requirement for payment service providers to reimburse victims of Authorized Push Payment (APP) fraud up to £415,000 per case will significantly impact the landscape of fraud prevention. Payment service providers will bear the brunt of these financial responsibilities, prompting stricter demands on merchants from financial institutions and regulators. This will likely lead to enhanced scrutiny and more rigorous fraud prevention measures, particularly for platforms like social media sites where many scams originate. The increased accountability will push businesses to invest more heavily in advanced fraud prevention technologies and strategies to mitigate the financial risks associated with APP fraud. The need for proactive measures and the importance of regulation are particularly relevant here, as these requirements will drive companies to adopt a more proactive stance in fraud prevention.
How can we minimize friction in the customer journey while ensuring a risk-free experience? Is it possible to remove friction and fraud simultaneously?
Balancing a seamless customer experience with effective fraud prevention is a delicate act. It’s crucial to apply appropriate levels of friction based on the risk profile of the transaction or sector. For instance, higher-risk sectors might necessitate more stringent verification processes, while lower-risk activities can be streamlined for user convenience. One approach is to incentivize customers to provide additional authentication through rewards or gamification, turning the security process into a positive experience. Additionally, educating and supporting customers to understand the importance of these measures can foster cooperation and trust, ultimately enhancing security without significantly disrupting the user experience. Fraud prevention has broader societal implications, and educating customers is a key part of a comprehensive fraud prevention strategy.
Whose responsibility is it to educate consumers about fraud? In which situations is this the merchant’s or a third party’s responsibility?
Educating consumers about fraud is a shared responsibility across the entire ecosystem. Merchants, financial institutions, regulators, and third-party service providers all play crucial roles. Each entity should contribute to raising awareness and providing the necessary tools and information to help consumers protect themselves. Collaboration and consistent messaging across these parties can create a more informed and vigilant public, better equipped to recognize and avoid fraudulent schemes. Industry networking and educational resources support this collaborative approach to consumer education.
How early should we start educating the young generation about the risk of fraud?
Education about fraud risks should begin at a young age, ideally integrated into school curricula. By teaching children about online safety, the importance of safeguarding personal information, and recognizing common scams, we can foster a generation that is more aware and better prepared to handle fraud threats. Early education can significantly reduce vulnerabilities and build a strong foundation for lifelong digital security practices. Both a proactive approach to fraud prevention and early education about risk are essential in building a resilient society.
How can we shift from being reactive to being more proactive in fraud prevention?
Shifting to a proactive stance in fraud prevention requires a multi-faceted approach. It starts with strong foundational support from legislators and regulators who can set the standards and frameworks for proactive measures. For businesses, adopting advanced technologies like AI for predictive analysis, investing in continuous education and training for fraud teams, and fostering a culture of vigilance and innovation are key. Proactive fraud prevention also involves staying ahead of trends by participating in industry networks and forums, where the latest threats and best practices are shared.
How much has the fraud landscape changed, and how has the way we tackle fraud evolved?
The fraud landscape has undergone significant changes with the advent of new technologies and the digitalization of commerce. Fraud tactics have become more sophisticated, leveraging AI and other advanced tools to exploit vulnerabilities. In response, fraud prevention stra
tegies have also evolved. Businesses are now using fraud orchestration tools that integrate various data points and technologies to provide a holistic approach to detecting and preventing fraud. These tools allow for better coordination and more effective responses to emerging threats.
How can you increase the rate at which users are willing to share their data with you to better prevent fraud?
Encouraging users to share their data for fraud prevention hinges on transparency and trust. Businesses should clearly communicate the benefits and importance of data sharing for enhancing security. Strategies such as gamifying the verification process or framing it as a premium service can also incentivize users. Ultimately, ensuring that the data collection process is user-friendly and respects privacy concerns will make users more willing to participate, thereby improving fraud prevention efforts. The broader societal implications of fraud prevention create the necessity for transparent and user-friendly approaches to data collection.
Explore more events here, or see Sift in action.