Let’s look at a situation

You have a product which is not supplied immediately and has a time lag before it is processed, packaged and sent out to the customer. This has been the window of opportunity to stop a fraud prior to losses and validate and verify against any negative lists such as PEPS and sanctions – post acceptance but prior to account opening.

But what if you now have a service which provides the service immediately once accepted – examples include virtual credit cards, instant access bank account, loans and so on. What if your defences that you enjoyed offline are now adding to the fraud threat?

Let’s suggest there is an offline referral rate of 10% of accepted applications. This should not affect genuine customers because only the fraudsters or suspected fraudsters will be inconvenienced by referral activity. There might be an 80% false positive rate, and while this may inconvenience the investigators, as they have more work, it does not inconvenience the genuine customers.

What if that same process is lifted to the real-time environment? This protects the business but may result in lost business from the proportion of genuine customers that have now been inconvenienced who walk away. What this could also lead to is an operational department with increased time-pressure to make decisions on all referrals. There is a balance though, as with the promise of immediate services may come the expectation to the end consumer that this means further checks up front.

How does a financial crime or fraud strategist balance this?

One’s answer might be to add services and processes that rapidly provide extra data, layers, and validation to reduce referral rates while maintaining the fraud finding capability. Some examples of capability include:

In conclusion, adding additional services may appear on first glance to be counter-productive, increase referral volumes and create additional customer friction, however, with the right strategies and systems in place the opposite can be true.

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