Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Online lenders enlist AI-driven behavioural analysis in the fight against fraud

Online lenders enlist AI-driven behavioural analysis in the fight against fraud

A survey conducted by PwC found that in 2018, 49 per cent of respondents said their companies were victims of fraud, up from 36 per cent in 2016
An online buyer picks the most expensive product in the catalogue without doing a price comparison, carries out the transaction very early in the morning, and hesitates when typing in personal details.

This type of behaviour would raise a red flag among those tracking online fraud, and while this work has been done manually by specialist staff, financial institutions are increasingly turning to AI to help.

“Behavioural data analysis by artificial-intelligence tools is more efficient to detect fraud than manually-based approaches,” said Shi Hongzhe, technology head of the US-listed consumer finance platform Lexin, which launched an AI-driven risk management platform aiming at detecting and preventing loan fraud.

“Many fraud cases cannot be identified by man-made rules,” he said.

Loans used to be approved largely based on the amount requested and the standing of the borrower, but the increasing rate of online fraud has forced the finance industry to look beyond its traditional methods of determining the reliability of a borrower. A survey conducted by PwC found that in 2018, 49 per cent of respondents said their companies were victims of fraud, up from 36 per cent in 2016.

The application of AI, specifically predictive machine learning algorithms, can help detect and stop fraudsters by analysing their mobile online interactions, including the speed in which they type in personal data and the time of day they visit websites.

Teradata, a San Diego-based data analytics company, offers AI-driven fraud detection solutions to banks. One of its clients, Denmark’s Danske Bank, employed AI software to cut the number of false positives generated by human-written rules engines by 60 per cent, and increase detection of real fraud by 50 per cent.

Lexin’s self-developed Hawkeye platform, which every day can detect more than 500 potential fraudsters involving 3 million yuan (US$426,000), is an example of how the broader financial-services industry is using machine learning to detect patterns that could signal criminal behaviour.

Algorithms can detect an illicit loan application by scanning for anomalies in certain behaviours and analysing digital information ranging from a device’s geolocation to biometric authentication. For example, the AI platform would send an alert if multiple loan applications pop up from the same device at an unusual time of day, such as dawn, when legitimate customers would not normally apply for loans, said Shi.

Some instalment payment applications could also be flagged as potential fraud if the buyer does not do any price comparisons online, and instead purchases the most expensive one.

In addition, as most online fraud involves identity theft, it can often be detected if the applicant does not fill in personal identification data smoothly, indicating they have not memorised the stolen ID.

Lexin’s other business, an e-commerce platform that offers instalment loans for product purchases, is also the target of scammers. In one new scam, a fraudster gains the confidence of target by convincing them to make small purchases from the Lexin platform on their behalf, offering to pay more money in return. Then the scammer does the same with a more expensive product, like an iPhone or iPad, and does not repay. The targeted “buyer” is left with the responsibility of paying off the rest of the loan.

If multiple similar cases like this are reported over a concentrated period of time, Lexin will push out warnings to its customers through its app.

“As fraudsters adopt new ways for online fraud, new scenarios are added to our system and the platform can issue a warning if similar behaviour appears,” said Shi.

In recent years, financial institutions have started using machine learning to prevent fraud, with some banks deploying the technology in direct response to the rise of more sophisticated cybercrimes.

“Nevertheless, the rate of AI and machine learning deployment as a fraud management measure remains relatively low,” Chris Holmes, senior vice-president of marketing consultancy KAE, said in a report. “We expect that this will not be the case for long, and that deployment in this area will rise significantly in the next two to three years.”

In October, Mastercard introduced its Threat Scan service which can identify vulnerabilities in merchants’ authorisation systems by applying an array of test scenarios that simulate fraudulent attacks.

Rival Visa is rolling out a platform that uses AI algorithms to help detect and prevent credit-card fraud.

“Financial firms detect online fraud by analysing behaviours,” said Shi, regardless of whether the approach used is low tech or high tech. “In the future when AI is more deeply employed, fraud may be detected by analysing facial emotions or voices. We will have a more natural interaction with the AI machines in the finance industry.”

Ping An Insurance, China’s second largest insurer by premiums, is already using face and voice recognition systems to protect its policyholders from fraud.
AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
16 Billion Login Credentials Leaked in Unprecedented Cybersecurity Breach
Senate hearing on who was 'really running' Biden White House kicks off
Hungary Ranked Among the World’s Safest Travel Destinations for 2025
G7 Leaders Fail to Reach Consensus on Key Global Issues
FBI and Senate Investigate Allegations of Chinese Plot to Influence the 2020 Election in Biden’s Favor Using Fake U.S. Driver’s Licenses
Trump Demands Iran's Unconditional Surrender Amid Escalating Conflict
Shock Within Iran’s Leadership: Khamenei’s Failed Plan to Launch 1,000 Missiles Against Israel
Wreck of $17 Billion San José Galleon Identified Off Colombia After 300 Years
Man Convicted of Fraud After Booking Over 120 Free Flights Posing as Flight Attendant
Iran Launches Extensive Missile Attack on Israel Following Israeli Strikes on Nuclear Sites
Beata Thunberg Rebrands as Beata Ernman Amidst Sister's Activism Controversy
Hungarian Parliament Approves Citizenship Suspension Law
Prime Minister Orbán Criticizes EU's Ukraine Accession Plans
Hungarian Delicacies Introduced to Japanese Market
Hungary's Industrial Output Rises Amid Battery Sector Slump
President Sulyok Celebrates 15 Years of Hungarian Unity Efforts
Hungary's Szeleczki Shines at World Judo Championships
Visegrád Construction Trends Diverge as Hungary Lags
Hungary Hosts National Quantum Technology Workshop
Hungarian Animation Featured at Annecy Festival
Israel Issues Ultimatum to Iran Over Potential Retaliation and Nuclear Facilities
UK and EU Reach New Economic Agreement
Coinbase CEO Warns Bitcoin Could Supplant US Dollar Amid Mounting National Debt
Trump to Iran: Make a Deal — Sign or Die
Operation "Like a Lion": Israel Strikes Iran in Unprecedented Offensive
Israel Launches 'Operation Rising Lion' Targeting Iranian Nuclear and Military Sites
UK and EU Reach Agreement on Gibraltar's Schengen Integration
Israeli Finance Minister Imposes Banking Penalties on Palestinians
U.S. Inflation Rises to 2.4% in May Amid Trade Tensions
Trump's Policies Prompt Decline in Chinese Student Enrollment in U.S.
Global Oceans Near Record Temperatures as CO₂ Levels Climb
Trump Announces U.S.-China Trade Deal Covering Rare Earths
Smuggled U.S. Fuel Funds Mexican Cartels Amid Crackdown
Austrian School Shooting Leaves Nine Dead in Graz
Bezos's Lavish Venice Wedding Sparks Local Protests
Europe Prepares for Historic Lunar Rover Landing
Italian Parents Seek Therapy Amid Lengthy School Holidays
British Fishing Vessel Seized by France Fined €30,000
Dutch Government Collapses Amid Migration Policy Dispute
UK Commits to 3.5% GDP Defence Spending Under NATO Pressure
Germany Moves to Expedite Migrant Deportations
US Urges UK to Raise Defence Spending to 5% of GDP
Israeli Forces Intercept Gaza-Bound Aid Vessel Carrying Greta Thunberg
IMF Warns of Severe Global Trade War Impacts on Emerging Markets
Low Turnout Jeopardizes Italy's Citizenship Reform Referendum
Transatlantic Interest Rate Divergence Widens as Trump Pressures Powell
EU Lawmaker Calls for Broader Exemptions in Supply Chain Legislation
France's Defense Spending Plans Threatened by High National Debt
European Small-Cap Stocks Outperform U.S. Rivals Amid Growth Revival
Switzerland Proposes $26 Billion Capital Increase for UBS
×