Global financial institutions need to get up to speed with appropriate technologies and procedures to protect their organizations from a rising tide of payments fraud, says fraud and detection expert Dena Hamilton.
Hamilton, who joined
“Payment channels are coming under increasing levels of attack compared to other verticals due to the ease with which they can be infiltrated and funds successfully siphoned,” she says. “Over the last 10 months, we have witnessed a surge in demand for our payment fraud management solutions, as financial institutions attempt to stem the hemorrhage of financial losses from their organizations.”
Findings from Norkom’s research, which was conducted among 162 financial crime and compliance professionals worldwide, also indicates that while the level of fraud attacks have reduced slightly over the past year, the financial losses associated with these attacks has risen considerably, directly impacting on financial institutions’ bottom lines. This is strongly indicative of the fact that fraudsters are becoming more targeted in their attacks on global institutions.
However, on a positive note, the findings also point to the availability of increased fraud budgets, with 47% of financial institutions expecting their fraud budgets to increase over the next 12 months, compared to just 21% reported in 2009.
Hamilton puts a perspective on the phenomenon, claiming that payments fraud is being fueled by the current economic climate, which sees financial institutions competing to deliver ever more convenient and cost-effective ways for customers to make payments electronically.
The problem of payments fraud arises due to an inherent imbalance between new product development and risk management, explains Hamilton. As financial institutions vie to achieve market share in the proliferating world of new payment channels by rapidly introducing newer, quicker and cheaper ways of making payments, risk management inevitably lags behind, leaving a gap which is being exploited by unscrupulous, well-funded, well-managed organized criminal gangs. Financial institutions need to identify these gaps and close them before they are targeted, she says.
“A lot of financial institutions are coming to market looking for electronic payments fraud solutions to help them manage this ceaseless problem,” Hamilton adds. “Payments fraud is not going away. If anything it will get worse with the continued proliferation of mobile banking – a double-edged sword that will deliver as many conveniences to fraudsters as it will to customers to conduct banking transactions, whether fraudulent or legitimate, from the comfort of their mobile phones. The only way to manage it is to protect against it by putting in place the necessary market-leading technologies that will bolster institutions’ defenses. And there’s no better time to do it than now – when fraud budgets appear to be recovering from the cuts of last year.”
