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Fraud detection: how to use machine learning (AI) in banks and fintechs
uFlow · October 18, 2022 · 1 min read
Find out how AI and machine learning, combined with a decision engine, detect and prevent fraud in banks and fintechs in real time.
The damage fraud can cause financial institutions is significant, both financially and reputationally. The best way to prevent it is to combine artificial intelligence and machine learning tools with a decision engine built for fraud detection.
Between 2019 and 2021 Latin America saw a 23% increase in fraud attacks, in line with the growth of e-commerce in the region (close to 31% in 2021).
What is fraud detection?
In simple terms, fraud detection is the system used to identify and block suspicious activity before it puts the business at risk. The traditional method takes a long time to process and involves a great deal of manual work.
How do you choose the right fraud detection services?
Artificial intelligence and machine learning are useful for finding fast, efficient solutions. They can process large data sets accurately, something humans can get wrong. Institutions can then improve their detection capabilities and avoid financial losses before they happen.
Features every anti-fraud solution must have
**Fraud scoring.** It reviews each transaction against dozens of indicators and assigns a numeric risk score.
**Machine learning.** It compares incoming information with historical data and "learns" from new inputs.
**Real-time monitoring.** It actively monitors and responds to payments, combined with automated identity verification.
**Detailed reporting.** Reliable, useful KPIs to understand what is working and where to optimize.
**Customizable rule sets.** It lets you build rules to approve or decline orders based on the unique needs of each company.
Benefits of using AI for fraud detection
**Fast detection:** it develops an understanding of user behavior patterns and detects anomalies in real time, avoiding false positives.
**Greater accuracy:** it can compute massive amounts of data at higher speed and with greater precision, telling genuine customers apart from fraudulent ones.
Conclusion
AI solutions work more accurately and at greater speed. The risk of blocking genuine customers is lower, customers are retained, exceptional experiences are ensured and operating losses from fraud are reduced.