TechDogs-Learn How "Fraud Detection Software" Will Surely Catch The Crooks

IT Security

Learn How Fraud Detection Software Will Surely Catch The Crooks

By TechDogs Editorial Team

TechDogs
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Overview

Did you know, master con-artist Frank Abagnale Jr. had encashed $2.5 million by defrauding the entire banking system of Northern America by the time he was 21 years old? Of course, you do; we have all watched Catch Me If You Can! There are thousands of people who followed his line, trying to get rich and give it to the system. Most of them get caught, thanks to the brilliant Fraud Detection Systems put in place by businesses. In this article we will be talking about what Fraud Detection Software is, the crazy story of how it came about, why it matters now and how a Fraud Detection Solution works. Ladies and gentlemen, it's time to fly!
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"Would you be interested in getting rich in the blink of an eye?"

Who wouldn't? Unfortunately, most quick-rich schemes are likely to be a scam (read very much illegal) and chances are that you are not going to be the next Frank Abagnale Jr. Remember Frank? The master con-artist, who cashed in fraudulent cheques worth $2.5 million and encouraged Steven Spielberg to make a biopic about him worth $352.1 million!

Shenanigans, like the above and many more, act as a catalyst for diverting resources from innovation to damage control and sometimes even costing human lives! To be fair, when we talk about fraud prevention, we include wrong payments, money laundering, account takeovers, hackers finding a way around public security and cybersecurity frauds. This is especially rampant in the digital-first world as digital trust banking and e-commerce transactions are on the rise and fraudsters are having a field day.

These laundry lists of smoke and mirror shams are the reason businesses need to improve their defenses by investing in Fraud Detection Software that will keep their customer's money and data identities safe, drive down costs while enabling innovation.

With that being said, let's learn a thing or two about the very helpful Fraud Detection Software (FDS).


What Is A Fraud Detection Solution And How Does It Protect The Organization?


As the name suggests, a Fraud Detection Solution is a tool that identifies irregular, sometimes illegal and risky transactions. Like an overprotective parent, that evaluates and prevents you from playing with that "bad influence" friend, this tool also keeps a check of all user-behavior, discovers patterns and determines the risk values based on previous knowledge and warns you about any bad activities. A Fraud Detection System monitors online transactions, to detect and alert organizations about any fraudulent transactions enhancing customer experience.

Think of Fraud Detection like a circle, with no starting or ending point. A wheel in continuous motion of monitoring data analytics, detecting anomalies, deciding if the transaction is fraudulent or not and learning from all the cases to improve future Fraud Detection through Artificial Intelligence (AI) and Machine Learning (ML).


Evolution Of Fraud Detection Solution From A Rule-based System To An AI-based System


Once upon a time, in a land not so far away, let's call it Capitalism, many business merchants were affected by the evil doings of Mr. Fraud - the supervillain. He had many friends who helped him, such as Mr. Incorrect Payments, Mr. Money Laundering, etc., who together terrorized the nation. The merchants of Capitalism (businesses) tried to prevent the malicious activities of Mr. Fraud with different methods such as establishing solutions based on business rules and rudimentary analytics that would alert the merchants about any funny business. This loosely translates to alerting organizations about any anomalies in the system.

However, the technology was not so advanced and couldn't protect them for long. Soon, Mr. Fraud and his goons found loopholes that existed because cross-referencing data mining was a manual process and transactions couldn't be monitored in real-time, leaving them always a step behind. By the time they would realize what happened, Mr. Fraud was long gone with his loot.

Frustrated with this, the merchants decided to build protective shields (Application Fraud Detection Solution) to combat Mr. Fraud. This shield successfully predicted the different tactics of Mr. Fraud and his allies, the possible schemes and revealed even the most complicated organized fraud management rings.

The merchants further empowered it with predictive and adaptive analytical tools, including Artificial Intelligence and Machine Learning. Even today, the battle against Mr. Fraud is not yet won. However, the Fraud Detection tools used by the merchants today are much more sophisticated and are competent enough to monitor the risk of possible attacks in real-time, giving the businesses a fighting chance to effectively detect and prevent application fraud.

Now that we know a thing or two about Fraud Detection Software, let's learn what is all the fuss about?


Why Businesses Need Fraud Detection Systems?


Gone are the days when a group of hippie teenagers and a dog could drive around in a blue van, solving crimes. Things are complicated right now. If you want to detect fraud in today's blazing fast world, you need an all-inclusive approach to connect all the data points and single out the odd transactions. You have no choice but to stay ahead of these shady people trying to outlaw the system.

The widespread cybersecurity breaches surge the need for real-time Fraud Detection Software. This is especially true for companies working in the eCommerce sector, banking and financial institution services. Online Fraud Detection Systems are also necessary for IT companies that collect their customers' authentication, location and device data.

Yes, all is good in the world but how does it benefit me?


The Benefits Of Online Fraud Detection Software


TechDogs-The Benefits Of "Online Fraud Detection Software"-2D Image With Characters To Show The Ways That Fraud Detection System Can Help The Organization: Monitor Incoming Data In Real-Time- Spot Anomalies In User-Behavior-Reduce False Positiveds


Apart from the fact it can help save your money from the Butch Cassidy's of the online world, here are some ways in which a Fraud Detection System can help your organization:
 
  • Monitor Incoming Data In Real-Time

    Seems like we have been singing the same song for a while but monitoring and processing incoming data in real-time to detect frauds is the most important job of the Fraud Detection System. This saves time from manually processing thousands of online transactions, decreases costs of manual labor and enhances the efficiency of catching frauds.

  • Spot Anomalies In User-Behavior

    The best thing about Fraud Detection Systems is that they can recognize correlations between user behavior and the possibility of fraud. Unlike the rule-based system, a Fraud Detection System can learn and detect new fraud analytics patterns by just browsing data.

  • Reduce False Positives

    Remember the good old days when your bank would block your card if you purchased something of a higher value than what you usually buy? Imagine booking your tickets for the much-needed vacation to Scotland. Everything is going well till the horror strikes and you find that the bank has declined your transaction. Next thing you know, your bank representative is on a call with you ensuring it was you who made the unusual transaction. As impressed as you might be by the bank's speed to take precautions, there is a high possibility that you might lose some promotional offer or the last seat on the plane, etc. The moral of the story is that banks need Fraud Detection Software that decrease the number of false positives.


While the Fraud Detection Systems can still decline legitimate transactions, over time, they learn to evaluate every transaction in a broader context, not just the amount of the transaction and the location, to decrease the number of false positives in general.

The Future Of Fraud Detection Software


We already saw in our story about the land of Capitalism and their battle against Mr. Fraud, the honest merchants (organizations) are still fighting against them. Now with better tools and AI-powered solutions though. Even in the future, there is no rest for the merchants, as they will have to continue battling these wannabe Robin Hoods with smarter Fraud Detection Systems. Have no doubt, AI and ML are going to be the foundation of Fraud Detection Platforms of the future.


Key Learnings


Just as Mr. Notorious BIG said "Mo'Money Mo’Problems," the anomaly of fraud risk investigation of attracting nefarious little tricksters increases as your business expands. The advancement of technology comes with its own pros and cons for your business - on one side you are making more #dolladollabillyall and on the other, you must be Uncle Scrooge and protect your treasure from hippie hackers and Fraud Detection Systems help you do precisely that!

As we discussed in this article, Fraud Detection Systems in any vertical of behavioral analytics can play a very important role in the early detection of online fraudulent claims and saving your business a lot of dough. So, whoever brings up the idea of installing advanced analytics on an elite Fraud Detection Solution, give them a raise - they deserve it.

Frequently Asked Questions

What is a Fraud Detection Solution and how does it protect the organization?

 
A Fraud Detection Solution is a tool designed to identify irregular and potentially illegal transactions within an organization's operations. Similar to an overprotective parent monitoring their child's activities, this solution evaluates user behavior, detects patterns, and assesses risk levels based on historical data to alert organizations about any suspicious activities. By monitoring online transactions and analyzing data, it enhances customer experience while safeguarding the organization's financial resources and data integrity.
 

How has Fraud Detection technology evolved over time?

 
Initially, Fraud Detection relied on rule-based systems and basic analytics to detect anomalies and alert merchants about potential fraudulent activities. However, these methods were limited in their effectiveness, as they required manual data processing and couldn't monitor transactions in real-time. With the advancement of technology, Fraud Detection systems have evolved into sophisticated tools empowered by Artificial Intelligence (AI) and Machine Learning (ML). These systems can now predict and adapt to various fraudulent tactics in real-time, providing organizations with more effective protection against fraudsters.
 

Why do businesses need Fraud Detection Systems?

 
In today's digital landscape, where cybersecurity breaches are rampant, businesses across various sectors, including eCommerce, banking, and financial services, require robust Fraud Detection Systems. These systems help organizations stay ahead of fraudulent activities by connecting data points, identifying suspicious transactions, and preventing potential financial losses. Additionally, Fraud Detection Systems are essential for maintaining customer trust and ensuring the security of sensitive information collected during online transactions.

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