Banks are now implementing machine learning algorithms that can detect irregular transactions almost real-time, avoid them from occurring automatically, and alert the authorities.


Fremont, CA: Frauds remain the biggest challenge for the banking industry and its clients, leading to massive losses every year. Credit card is the most prevalent form of fraud and, according to one study, 270,000 cases of credit card fraud happened in 2019 alone. Most of the scams occurred with retail consumers, but companies and sometimes even banks have directly experienced massive losses following such fraud cases.

The financial business is now using state-of-the-art artificial intelligence technology to intercept these frauds as quickly as possible to stop them from happening. Let us see some of the key areas where AI is extensively used to identify or prevent financial fraud.

Fraudulent purchases

Cybercriminals often obtain bank account details or credit card details through different means and use them to do illegal transactions and siphon off the victim's accounts. If transfers are not halted quickly, it becomes impossible to reclaim money and is frequently lost permanently.

Banks are now implementing machine learning algorithms that can detect irregular transactions almost real-time, avoid them from occurring automatically, and alert the authorities.

Phishing Scams

Cybercriminals target vulnerable people by sending them email links that claim to be mail from their bank. By clicking on a link, criminals can access their confidential banking or card information for fraudulent transactions. As per the new report of the computer protection firm ProofPoint, 9.2 million malicious emails were obtained from users in 2020. And, sadly, about 30 percent of phishing emails are available to vulnerable targets.

While banks are not directly involved in preventing such phishing scams, credit goes to email companies like Google. They already have sophisticated machine learning algorithms that warn the customer that this is a phishing mail and should not be clicked or sent to the spam box instead. Gmail's machine learning blocks more than 10 million spam and malicious emails per minute. 

False Insurance Claims

It is not rare for insurance providers to receive fraudulent insurance reports from persons and companies. If such allegations are not identified in advance, insurance firms could wind up paying insurance money to the scam claimant. Research estimates that insurance fraud results in a loss of at least $80 billion annually across all insurance lines, and the US alone saw a loss of $34 billion in 2019. One-third of the insurers conclude that fraud accounts for up to 20 percent of the premiums' cost.

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