The Emerging Role of Risk Orchestration Technology in Combatting the Threat of Fraud

Eddie Vaughan, Banking Expert for the LexisNexis® RiskNarrative™ platform, highlights through new research how financial organisations are evolving from risk management to risk orchestration, as they strive to better connect the systems and data sources used to combat fraudulent and criminal activities.

The ongoing challenge

Despite the best efforts of financial organisations, they are still losing millions per year because of fraud and financial crime. Figures released last month by UK Finance1 show that criminals in the first half of this year stole a total of £609.8 million through authorised and unauthorised fraud and scams. And while this figure is down from the record highs seen during the pandemic, the number is still significant.

Cost-of-living crisis set to cause further headaches

New research by global data and analytics company, LexisNexis® Risk Solutions, shows that 43% of financial services organisations expect the cost-of-living crisis to increase the risk of financial crime and fraud over the next 12 months, as scammers target vulnerable consumers struggling with rising bills.

The research also highlighted a concern that criminals are outpacing efforts to protect banks and their customers. A third (30%) of financial services organisations believe anti-fraud and financial crime systems are not developing fast enough to keep up with criminal techniques, whilst a similar number (32%) think fraudsters are spending more time targeting victims.

So, with criminals continuing to look for new ways to exploit potential victims as fraud continues to evolve, it’s more important than ever for financial organisations to advance their risk management solutions.

Helping to prevent fraud

The good news is that the advanced security systems now widely being used by banks prevented just under £584 million from being stolen in the first six months of 20221.

And financial organisations continue to play their role in helping to reduce fraud. In fact, the new study revealed that, on average, financial services providers rely on five external vendors for data sources or solutions to prevent fraud and financial crime across their customer onboarding and lifecycle – with half of these firms (49%) highlighting that having multiple solutions in place helps to increase protection.

In addition, UK Finance’s Information and Intelligence Unit2 helped protect over 2.1 million compromised card numbers in 2020. The industry is also working closely with the government on measures to strengthen the fight against fraud and economic crime, including through the Economic Crime Strategic Board jointly chaired by the home secretary and chancellor.

However, while financial organisations can only do so much, with social engineering for example an increasingly utilised tactic to trick consumers out of their savings, many banks and the wider finance sector are starting to see risk orchestration as the latest weapon in their armoury to tackle the fraudsters.

The move to risk orchestration

To address rising levels of risk, the independent research indicated that seven out of ten (69%) finance organisations say they will invest more in technology over the next 12 months, with six in ten (59%) prioritising the emerging concept of financial crime and fraud risk orchestration.

Orchestration provides an end-to-end solution for customer onboarding and ongoing monitoring, incorporating anti-money laundering screening, transaction monitoring and case management, all within a single platform. It overcomes silos and manual processes to deliver more informed insights that enable quicker and increasingly accurate assessments of risk. Orchestration can help give businesses the flexibility and choice to deploy as many vendors and data sources as needed in their screening and monitoring, without the usual logistical headaches.

The research also indicated that the move to risk orchestration is well underway. The majority of respondents (74%) surveyed were already aware of risk orchestration platforms, identifying the main benefits as being: the ability to automatically track customer transactional behaviour over time and flag anomalies (48%); being able to bring all customer checks into a single, unified, digital platform (46%); and creating risk-based financial crime and fraud screening bespoke to varying risk appetites (41%).

New research by global data and analytics company, LexisNexis® Risk Solutions, shows that 43% of financial services organisations expect the cost-of-living crisis to increase the risk of financial crime and fraud over the next 12 months, as scammers target vulnerable consumers struggling with rising bills.

Risk orchestration in practice – Ikano Bank

Ikano Bank was founded in 1995 by Ingvar Kamprad – part of the family behind global retailer IKEA. The bank offers direct-to-consumer products including loans and store cards. In the UK, the bank opens hundreds of new interest-free loan accounts per day.

The bank considered the biggest risk it was facing was in ID fraud and document verification. With a view of providing efficient, first-class digital onboarding and fraud risk management, they needed a supplier that would give instantaneous decisions.

LexisNexis® Risk Solutions was able to supply Ikano Bank with the orchestration platform, RiskNarrativeÔ, that integrated with their existing data to grant them the ability to run ID and document verification, address checks and internal and external fraud rules. Along with this, the platform provided increased Cifas screening – before, Ikano Bank would only check an applicant address, whereas now they can match additional information such as email addresses, mobile telephone numbers, and sort codes, reducing their false positive rate.

A year on from going live with the RiskNarrative platform delivering their digital transformation, Ikano Bank have onboarded over 70,000 customers.

The financial crime manager at Ikano Bank commented that the automated decisioning has removed many referrals and freed up time for staff. The solution has made a significant difference to what the bank used to see.

RiskNarrative has enabled the bank to be in charge of the fraud rules the organisation sets, so it only sees the referrals it wants to see, with the ones the bank does not want to see, or the ones it declines, taken care of. This has enabled them to have greater control.

Whilst the RiskNarrative platform is currently only used in the UK, Ikano Bank is also looking to introduce the platform across their Sweden branches and beyond.

The future role of risk orchestration

With banks and the wider financial sector leaving no stone unturned in the ongoing battle to beat the fraudsters and reduce crime, risk orchestration is set to play a significant role in tackling fraud while supporting financial organisations with ongoing compliance requirements and customer acquisition targets.

For further information, visit RiskNarrative™ Platform | LexisNexis Risk Solutions.

 

References

Half-year fraud update 2022.pdf (ukfinance.org.uk)

Fraud The Facts 2021- FINAL.pdf (ukfinance.org.uk)

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