Don't Let Fraud Distract From Your Banking Mission
At Q2's CONNECT 25, financial fraud was one of the main content tracks, and with good reason.
The stats about the growing problem of fraud weren’t hard to find among the presentations, panels and talks. Here are just a few of the sobering metrics shared:
- 60% of FIs experienced fraud growth across their customer base, year-over-year, with more than 31% losing more than $1 million.
- AI has emerged as a factor, driving 43% of all fraud attempts.
- That said, Q2 Chief Availability Officer Lou Senko noted that “good old-fashioned check fraud” is also up 86%, with payee name alteration the most common tactic used.
- The average number of transaction disputes per Q2 customer rose 17% year over year, with the amount disputed increasing by 30%.
These stats didn’t open eyes, though. Rather, they served as painful reminders.
“We don’t have to tell the people here that financial fraud is up and to the right,” said Jeff Scott, Q2 VP of Fraudtech, during his keynote conversation with Tommy Nicholas, CEO of Alloy.
“We’re preaching to the choir,” Nicholas agreed. “The folks here know better than anyone that there’s a rise, both in financial pressure from fraud losses, and in the pressure from end customers, from the pain they’re feeling.”
In theory, you could stop fraud right now simply by turning everything off and retreating from digital—push customers back into the branches and do more things on paper. But that’s obviously not the answer. That would move your bank or credit union away from what they’re meant to do—serving their customers with the financial solutions they need to improve their businesses, their lives, and, by extension, their communities.
“It's not all about, ‘How can we restrict?’” Jeff Scott said. “It's about, ‘How can we do that if we have to, but also, how can we do MORE, based on a good risk score, and let customers have the experience that they want?’”
In other words, you need to make sure your fraud solutions help you get back to banking.
Many ideas were shared about how to accomplish that goal. Here are four that formed a thread throughout the three days of CONNECT 25.
Whenever Possible, Automate
You can’t fight fraud effectively if you can’t fight it efficiently. And too often, bankers are still struggling under the weight of manual processes that are both time intensive and error prone.
Some institutions are trying to handle dispute cases with a process “that’s being held together by duct tape,” noted Emily McDougall, Product Manager at Q2. Others are struggling to track ACH returns or are trying to collect and consolidate origination activity from multiple sources for review.
“At a lot of institutions we talk to, it takes them 4-plus hours to do one risk review, for one originator,” said Bruce Dragoo, Manager of Solutions Consulting for Q2’s Centrix products.
Whenever possible, banks and credit unions need to look for ways to let computers do the things computers do best, so their bankers have time to do the things bankers do best.
This can be as simple as an automated card cancellation that kicks in immediately when a fraudulent transaction is disputed. Other times automation is enabled via a well-placed integration, like the one that Centrix ETMS (Q2’s Positive Pay offering) uses to connect to the check register in business customers’ accounting system to automatically load issued check files throughout the day.
AI is also playing a bigger role. It powers the enhanced Payee Match capability in ETMS, enabling it to accurately detect issues—even on handwritten checks—and take on a task that was previously manual, time-intensive, and error-prone.
Turn Data From a Challenge Into a Weapon
In a recent report by Datos, “Advancing Fraud Prevention: Orchestration Solution Adoption in Financial Services,” 95% of executives at financial institutions identified siloed data as the biggest challenge they face in their efforts to fight fraud.
The data pouring in from so many inputs and point solutions can paralyze your institution. It leaves you with fragmented views of their customers, while your fraud analysts are bouncing between different systems, trying to cross-reference and reconcile data.
To avoid this, you need to break down those silos and create a data flow ecosystem, in which all that data you’re pulling in (The problem is almost never about having enough data) gets centralized into a hub, where you get a unified, 360-degree view of each customer.
Once you have that, you’re a ble to make smarter, more informed decisions about each customer and the risks they may/may not be facing.
Then—and this is where things get exciting—you can transmit data back down all those lines, to your front-line bankers and your digital platform where it can be acted on in real time to proactively stop fraud.
That, in a nutshell, is what Q2 and Alloy are doing with their Ongoing Fraud Monitoring Solution.
“Not only are we getting the data,” said Parilee Wang, Alloy’s Chief Product Officer. “Not only are we making a decision about it, but we’re actually integrated to take action on those decisions.”
Help Your Customer Help Themselves
It’s hard to spot a fraud attempt when customers have been duped into giving away their personal information or they are erroneously sending money to a fraudulent source. And it’s extremely difficult to stop fraud when you can’t get customers to use tools that would help them protect themselves.
For example, in a 2024 AFP survey, 80% of respondents said they were victims of attempted or actual payments fraud activity in 2023. Yet, in a Datos survey conducted in Q4 2023, 40% of the businesses that responded admitted they didn’t even know what Positive Pay was.
But if your institution can take the time and effort to educate your customers—both business and consumer—and give them the ability to better spot fraud attempts and avoid them, then you’re effectively stopping fraud at the source, before it ever reaches the metaphorical walls of your bank.
Gwen Perkins, Product Manager at Synovus, shared how the bank had taken that approach to help their business customers fight payments fraud. In 2024 Synovus launched a multi-pronged effort to ensure their business customers understand the importance of Positive Pay and why they should adopt the solution. Sometimes this was done through a blunt conversation with customers after a fraud incident. But Synovus has also made a serious marketing push—hosting webinars and sharing articles and reports, like the ones from AFP and Datos, to keep customers informed.
In 2024, this proactive education campaign led to 20% year-over-year growth in the total accounts on positive pay, while the number of accounts Synovus added in 2024 was 75% higher than in 2023.
It’s Okay to Collaborate With Your Competitors
In one panel discussion, Saša Zdeljar, Chief Trust Office at Reversing Labs, gave a glimpse into what the modern fraudster looks like.
“You can imagine these as well oiled, finely tuned businesses that now run just like Fortune 1000 companies,” he said.
These aren’t lone wolf hackers coming at FIs one at a time. These are coordinated groups working together to commit fraud, at scale.
“The techniques and the methods they’re using are accelerating,” noted Beth Anne Bygum, Q2’s Chief Information Security Officer.
So it doesn’t make much sense for each FI to wage its own fight with fraudsters. Fortunately, Connect attendees are embracing that collaboration concept.
At the end of her session on Dispute Management, Emily McDougall introduced the Q2 Dispute Network, which—when it moves from concept to reality—would pool together data from the hundreds of FIs that use the Centrix Dispute Tracking System (DTS) solution, to uncover fraud trends and share that information back with each institution. She then asked the audience about their potential interest in the potential network, and hands shot up throughout the room.
“Otherwise, you’re kind of swimming alone and trying to figure out, ‘Is this just happening here? Is it going to be recurring?’ “noted Lindsay Beyer, VP, Digital Services at Wisconsin-based Fox Communities Credit Union, who recalled her positive experiences sharing fraud data with other institutions in her region.
“Having the feedback from colleagues in our areas is really helpful and can stop trends immediately.”
Conclusion: Why Not Both?
The sentiment at CONNECT 25 during the fraud presentations, panels, and discussions was one of guarded optimism. The obstacles ahead and the work needed to overcome them were evident. But it was also clear that this current fraud challenge presents an opportunity for banks and credit unions to forge even stronger bonds with their customers.
“I'm tired of talking about fraud protection and good customer experiences, like they're mutually exclusive,” Parilee Wang said. “At the end of the day, we care about both.”