What Banks Are Saying Now About Enterprise Fraud

In recent months, FICO’s Enterprise Fraud Group has been seeking informed counsel from individuals across the financial services spectrum, looking to understand how enterprise fraud management is evolving in different organisations and in different parts of the world. What we’ve found represents a real change in the concept of enterprise fraud management and how it will be achieved.

Most business leaders we’ve spoken with agree that the historic concept of enterprise fraud management – one monolithic system that does everything in a fraud management context across all products and channels – is yesterday’s vision. Sure, some organisations have the operating model, IT infrastructure, integration capability, business appetite and vendor contract alignment to make it happen, but that is rare. Most businesses are hampered by divergent operating models, complex legacy architecture, conflicting priorities and a desire to maximise existing business investment. The reaction against the old vision is so strong that some bankers told us to stop talking about “enterprise” fraud management altogether! Banks want to keep their existing systems that work well, and join them where possible to create a more cogent and cohesive fraud management system.

There are still many divergent ideas about how extensive and connected an “enterprise” fraud system needs to be. But there is a very strong common thread: the need for a more informed and insightful approach through the determination, capture, interpretation and application of data across a customer relationship. It’s not enough to have more information about a customer — the information needs to be analysed and applied intelligently and appropriately to improve fraud protection and thus customer satisfaction.

For example, being told that a customer is about to go on holiday abroad might, today, result in a bank applying a “holiday flag” to their fraud detection system to limit the risk of the customer being declined whilst overseas. Even data as simple as this can be applied more intelligently — for example, it could be used to postpone delivery of a new card of cheque book to the customer’s house while they are away, thus reducing the chances of interception.

In the next 30 days, FICO will release an Insights white paper that captures the state of enterprise fraud thinking, and presents the approach we are taking to match banks’ changing strategies. It may not be the final word in the “enterprise” debate, but it should prove interesting reading for any bank looking to maximise fraud protection while minimising investment. To make sure you get the white paper when it’s published, sign up at www.fico.com/insights.

Comments

[bo jonson]

Brian,
I happened upon your blog entry while researching the LIBOR scandal. I'm a student (not in the financial services industry), but have an interest in developments that relate to security at the major commercial banking level. I know that sounds somewhat suspicious, but my curiosity is limited to a clarification of the focus of FICO's enterprise fraud management efforts.

Specifically, I wondered if "Enterprise Fraud Management" is a term relegated to the retail market or extends to commercial markets.

The unregulated Interbank Market, other spot & derivative markets, central banks (Fed, ECB, PBOC), major banks (UBS, Barclays, Deutsche, Citi, Chase...), Hedge Funds are apparently all susceptible to fraud. And not from the bottom up!

I'll keep researching to learn more, but look forward to hearing from an expert.

bo jonson

[Brian Kinch]

Hi, Bo,

Thanks for your interest. "Enterprise" has been used extensively across the financial services landscape in recent years, with the definition of the term varying widely based upon the part of the business that is being represented; the aspirations to share salient information across the organisation, customers and financial records; and the maturity of the organisation on their journey toward a more holsitic/connected approach to risk.

Hopefully you have signed up to get the whitepaper, which will offer you more around the latest thinking. This absolutely leads with retail banking but rest assured that at FICO we are often approached to help organisations in broader risk elements in the corporate/business world and across the risk discipline including areas of compliance and overall financial crime. Additionally we actively engage with those who disintermediate the traditional banking paradigm.

Whilst types of business and the nature of the "customer" will differ, there are clear commanalities in the fraud approach irrespective of sector.

Good luck with your studies.

[johnluisaiden]

Hello,i found your site through search,yours blog is excellent and a nice site...

The contents are nice &will grow higher in future...

thanks,

[Brian Kinch]

Thank you for your active interest and positive comments, John. They are very much appreciated.