Introduce to AI Technology To Combat Fraud
In 2020, identity fraud increased by 3.36 percent as compared to the previous year. The United States reported the highest cases of identity fraud where 7-10 percent of the population went through threats related to identity theft every year. On top of that, 21 percent of the U.S. citizens also reported to have faced such issues more than one time. Therefore, it is evident that fraudsters are advancing with the times, causing a year on year increase in the amount of data breaches, fraudulent transactions and identity theft.
With the intention of tackling these threats, companies have employed AI technology to streamline their processes and make data extraction and collection more accurate. AI-powered solutions offer numerous benefits. While some simply enable an ID barcode to be scanned (through OCR or MICR technology for example), more robust technologies have made forensic and biometric verification a present day reality for weeding out fraudsters.
This article will discuss how AI technology, along with its subsets of ML (Machine Learning) and Deep Learning (DL), not only enables accurate verification of identities but also assists companies in the detection and prevention of fraud.
Traditional Method Of ID Verification
Prior to the advent of AI technology, accessing an online portal required its users to provide unique answers to questions that only authentic users could respond to. This method of online identity authentication, known as Knowledge-Based Authentication, is merely an insignificant speed bump to the modern-day cybercriminal. With the rapid growth and usage of social media sites, working out the personal details of an individual’s life is not a difficult task anymore. With that being said, it is safe to say that traditional methods of identity verification consist of various flaws, and the risks associated with them are extensive.
Additionally, SMS-based two-factor authentication is another commonly used tactic of customer authentication. However, cybercriminals are able to easily intercept the SMS codes through phishing attacks. Thankfully, AI has enabled companies to utilize automated software to increase productivity while ensuring data security and accuracy.
Online Document Verification
Online document verification has streamlined the process of customer verification through 5 simple steps:
- An AI-based identity verification software is integrated into the company’s system
- During customer onboarding, this software requires end-users to take or upload their picture along with an image of their ID documents
- Using OCR technology, the software is able to extract relevant data within seconds
- The data extracted is then matched with the documents provided
- If the provided information is accurate, only then the customer gains access into the platform.
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Additionally, a list of valid documents is given below:
- Government-issued ID cards
- Bank statements
- Utility bill
- Employer letter
- Rent agreement
- Driver’s license
- Tax bills
Applying Machine Learning to Combat Fraud
Computer software that utilizes AI are capable of rapidly and efficiently analyzing customer data, and also help in the identification of potential red flags within seconds. Although AI might not eliminate the need for human experts altogether, it can be significantly used to assist in their daily processes, making the business more efficient. As fraud detection systems based on AI technology become more advanced, this type of technology is being used in the business sectors which are vulnerable to fraudsters. Here’s how financial institutions are using AI to combat financial fraud:
Payment Fraud Detection
From detecting suspicious payments and stolen identities to analyzing insufficient funds, machine learning can make the process of fraud detection more accurate.
Banking Fraud Detection
In today’s era of technological advancement, most B2B and B2C banking is done online, making this an attractive field for cybercriminals to operate in. ML-based software provides the most efficient way to sort through the high volumes of transactions that take place every second.
Due diligence of online transactions, customer identity verification and sensitive data protection are critical for the majority of e-commerce vendors, e-wallets, and financial institutions that provide financial services through digital platforms. AI software can be used to efficiently automate verification checks, helping industries run more securely by filtering out fraudsters.
Curbing Tax Evasion
AI-powered software that uses predictive modelling allows authorities to study fraudulent cases to analyze which historical cases are correlated most with current suspicious cases. Through AI and robotics technology, individuals that are not fully paying the tax amount or evading tax altogether can be easily identified by monitoring their financial transactions.
- AI technology has enabled companies to abandon traditional methods of identity verification
- Companies today are increasingly utilizing automated software to increase productivity while reducing errors
- Online document verification has streamlined the process of customer verification
- Financial institutions are using AI to combat financial frauds like tax evasion, payment frauds and other banking frauds