Technology giants remain complacent about online fraud. That’s why we need a cross-industry solution to fight it.
David Morris, Chief Technology Officer, Pay.UK
Online fraud is a crime that didn’t even exist in the 20th century. Yet over the last decade, as the internet and social media went fully mainstream, it has quickly become one of most prevalent crimes in the Western world. Last year nearly 80% of all UK fraud originated online, according to UK Finance, with criminals constantly finding new and cunning ways to exploit digital channels such as messaging and dating apps.
Phone farms, fraud adverts and APP scams: they all use the vulnerabilities of current technologies and telecommunications systems for the benefit of cybercriminals. While the UK government is attempting to address this with its recent Fraud Strategy, technology giants remain complacent about the fraud happening on their platforms. Solutions simply come too slowly. And the rapid rise of Generative AI products such as ChatGPT will only make the situation worse by giving cybercriminals frightening new tools that will make their crimes quicker, more precise and more effective.
Technology is at the root of this problem. And it also is the only available antidote. The application of AI in the financial sector has brought about a paradigm shift in fraud prevention strategies. By analysing vast volumes of data, AI models can recognise patterns that indicate fraudulent activities, enabling banks to adapt to emerging threats and intervene in real-time. Moreover, automation can help streamline processes and cut response times of financial institutions, as well as reduce end user errors exploited by fraudsters.
As an example of progress, in 2020, Pay.UK introduced the Confirmation of Payee service, which was swiftly adopted by leading banks and payment service providers in the UK. This initiative helped enhance transaction security and prevent unauthorized payments, safeguarding consumers from falling victim to fraud. Banks, regulators, online retailers, and fraud prevention bodies have since introduced a range of additional tools and technologies that have made a significant difference, foiling countless attempts to defraud their customers.
Overall fraud in the UK fell by 8% in 2022 and by further 2% in the first half of 2023, largely thanks to these new technology and prevention measures. This means over £1.2bn of consumers’ money was kept from the hands of criminals. But we can’t rest: the evolving tactics of fraudsters and the increasing sophistication of their schemes demand constant innovation and collaboration across the payments industry.
Isolated solutions are no longer enough. The key to effective fraud prevention lies in fostering a united front against this ever-growing and ever-evolving issue, network level insights are key. The financial industry and technology giants must recognise the importance of shared resources, information exchange, and collaborative partnerships. Only through such collective efforts can we truly leverage the full potential of technology and AI in thwarting financial fraud.
As more of our day-to-day life migrates online, it becomes more important that all actors involved in the financial and payments ecosystem invest into developing a safer and more secure financial environment, which extends from bills and utilities to shopping and investments. AI-driven fraud prevention tools, which use a wealth of available data across platforms to act in real-time is how we can create an environment where fraudsters have nowhere to hide.
This year, we saw some important cross industry moves which show we’re progressing in the right direction. Pay.UK is collaborating with Visa, Synectics Solutions and Featurespace on a pioneering initiative which uses data sharing to detect and prevent fraud. We are expecting results from the initiative shortly, with the aim of creating a new overlay service which will analyse the money flows data and use predictive intelligence to fight fraud.
The importance of data cannot be understated. The vast amounts of digital information generated daily holds valuable insights into potential fraud patterns. Through leveraging AI and data analytics, we can make proactive decisions, identify anomalies, and intervene promptly to prevent fraudulent transactions. Banks, PSPs, FinTechs and, crucially, technology companies all hold important pieces of the puzzle, which together create the cohesive picture needed to allow regulators and law enforcement to stop and prevent complex fraudulent operations.
We have a collective responsibility to prevent fraud from happening. It therefore follows that the UK needs to create a system that ensures we are all accountable. Technology businesses need to play their part and help provide the tools which will allow us to unlock the transformative potential of AI. If we don’t move quickly and take advantage of it, the fraudsters certainly will.
Jesse Pitts has been with the Global Banking & Finance Review since 2016, serving in various capacities, including Graphic Designer, Content Publisher, and Editorial Assistant. As the sole graphic designer for the company, Jesse plays a crucial role in shaping the visual identity of Global Banking & Finance Review. Additionally, Jesse manages the publishing of content across multiple platforms, including Global Banking & Finance Review, Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune.