New Account Risk Scoring and Fraud Prevention
New account risk scoring is an essential tool to help reduce the false positive rate and focus resources on high-risk accounts. It’s also critical to help FIs meet consumer and business expectations of frictionless, easy experiences when it comes to opening bank or credit card accounts.
A variety of factors can raise suspicions in new account screening, including repeated transactions just below reporting thresholds or sudden shifts in the type or beneficiaries of payments. Discrepancies in transaction locations, IP addresses or billing addresses can also trigger concerns. Anomalies, such as a dormant account suddenly seeing a flurry of activity or a significant amount of cash deposits from an online retailer, can also warrant further investigation.
Beyond Sign-Up: Understanding the Power and Purpose of New Account Risk Scoring
As consumers become more accustomed to the easy, frictionless onboarding experiences provided by companies such as Apple and Lyft, banks are under pressure to provide similar experiences at the point of customer acquisition. However, reducing or eliminating friction comes with a price—in the form of elevated fraud risks. On average, FI respondents to Aite Group surveys report that fraud rates in digital channels are eight times higher than those in branches.
FIs can combat rising new account fraud risks by using advanced, scalable tools for conducting KYC (Know Your Customer) due diligence and accelerating investigations. This includes incorporating real-time bank account information, combining behavioral analytics with network science and machine learning techniques, creating and maintaining a formal record of how the model was designed and factor weightings, and deploying transparency techniques that make it easier to explain scores and accelerate investigations.
…
