Sharing fraud data a must for “jealous” banks

Banks must be more willing to share data and build cross-industry standards to beat fraud, according to Abdeslam Alaoui Smaili, CEO of HPS Worldwide, the payments provider.

“A couple of years ago, the banks were jealous about keeping information around fraud, now [sharing] it is a must,” said Smaili, speaking at the firm’s community conference this week.

“They need to make sure all the players within instant payments are sharing any behavioural data. Just to make sure that globally the system will keep consistency,” he said.

Card-not-present (CNP) fraud is increasingly costing merchants and their banking providers, both on the compliance and remuneration front: Juniper Research has found that CNP fraud will cost $130bn in revenue between 2018-2023, significantly up on their 2017 projection of $71bn for the same period.

But Jeroen Holscher, head of global payments practice at CapGemini, believes the answer lies in the banks pushing back on consumers in areas of fraud.

“The bank can set levels,” said Holscher, on the same panel. “But it is up to the customer to decide what is acceptable. Of course, it’s a grey area because the customer expects in the end that the bank can be trusted and its secure.”

Banks have been ramping up anti-fraud security: NatWest recently announced a pilot of debit cards authenticating payments using biometric fingerprints.

But Smaili and Holscher are not convinced the industry is ready for the new technology.

“As a consumer, I know that if I lose my card I will get a new PIN. I cannot do that with my fingers if they are compromised. It’s a real question to ask one day when we have this problem. We’ve also been told that quantum computing is coming so all of our cryptographic security will have to change,” said Smaili.

Holscher meanwhile believes that mass behavioural data analysis by the industry is essential.

“In terms of fraud, there will always be cases where technology can be cracked or broken so it’s not only about technology but combining it with behavioural elements reduces fraudulent activities significantly,” he said.

An audience member pointed out that the industry was more than capable of launching SEPA instant credit transfer but more reluctant to work together on a fraud management twin system. The audience member finished by asking the panel if it were the regulator’s imperative.

“I don’t think it will be a regulator’s part to do it, it is up to the players in the market to find a way to exchange that information to find a common ground which is very useful for collaboration. The regulator will always look at competitive clauses – especially in Europe that’s a tough case right now,” said Holscher.

Another panellist, founder of femtechglobal, Ghela Boskovich added that each bank already had an incentive as greater fraud detection would give them an edge.

“It’s every institution’s own initiative as to how they tap into their transactional data and apply data science principles to the behavioural insights that would allow them to flag something up as potential fraud.

“I don’t know if we’ll ever get to the point for regulators to have standards. It won’t be a regulatory thing but a market strategy and competitive advantage based on data science,” said Boskovich.

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