# Fighting Fraud in the 2020’s
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2020-01-08
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: How Financial Institutions Can Combat Payment Card Fraud - Expert Insights
Meta Description: Discover the likely future of payment card fraud and learn how to best prepare against evolving techniques. Explore the need for a new approach to stem fraud
URL: https://financedigest.com/fighting-fraud-in-the-2020shtml

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_By **Sune Gabelgård**, Head of Digital Fraud, Intelligence & Research at Nets, unpacks the likely evolution of payment card fraud and explains how financial institutions can best prepare themselves_

Payment fraud prevention is an increasingly complicated and constantly evolving business. Issuers and merchants everywhere are being challenged by a growing variety of payment methods, which are fuelling the rise of ever more sophisticated card fraud techniques. Despite awareness of the scale of the problem, and the proliferation of innovative new technologies, the volume of fraudulent transactions is continuing to grow across Europe [\[1\]](https://mail.google.com/mail/u/0/#m_7582020529260063070__ftn1). To stem the tide, financial [institutions](https://www.financedigest.com/top-5-security-technologies-that-every-finance-institution-workplace-should-consider.html "Top 5 Security Technologies That Every Finance Institution Workplace Should Consider") need a new approach.

[**Changing the rules**](https://www.financedigest.com/german-regulator-stays-vigilant-as-meta-changes-vr-headset-rules.html "German regulator stays vigilant as Meta changes VR headset rules")

![Sune Gabelgård](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/sune-gabelgard-1736838962870-compressed.jpg)

Sune Gabelgård

Part of the problem is that regulations do not stop [payment fraud; they simply encourage it to migrate between departments and regions](https://www.financedigest.com/combating-payment-fraud-in-the-era-of-contactless-everything.html "Combating payment fraud in the era of contactless everything"). The [case for payments](https://www.financedigest.com/building-a-business-case-for-integrated-payments.html "Building a Business Case for Integrated Payments") regulation like PSD2 goes like this: the Strong Customer Authentication (SCA) requirements mandated are so stringent that they will stop fraudsters in their tracks.

Except…not quite. In reality, criminals will react to the EU legislation by changing their modus operandi. Fraudsters are very agile and used to adapting to new landscapes. For them this is not the end of the road, but merely a fork in it. In the long term, they will develop new, more advanced tactics that will enable them to resume [targeting European](https://www.financedigest.com/chinese-carmakers-target-more-european-sales-with-five-star-evs.html "Chinese carmakers target more European sales with five-star EVs") consumers and merchants once more. In fact, as early as January 2018 we were [seeing criminals preparing for and testing how they will commit fraud in a post-PSD2 world](https://www.financedigest.com/in-u-turn-iea-sees-world-weathering-lost-russian-oil-supply.html "In U-turn, IEA sees world weathering lost Russian oil supply") using shell companies and sophisticated social engineering.

This lack of understanding has created a cycle in which financial institutions are trapped: fraudsters work out how they can navigate current systems; [banks implement reactive measures](https://www.financedigest.com/spain-expects-to-agree-with-banks-mortgage-relief-measures-by-end-of-week.html "Spain expects to agree with banks mortgage relief measures by end of week") (either of their own volition or as mandated by regulators); fraudsters work out how to navigate the updated security measures and resume criminal activity; and on, and on, and on….

To win, issuers [need to change the rules](https://www.financedigest.com/ftx-collapse-shows-urgent-need-to-finalise-eu-crypto-rules-says-european-commission.html "FTX collapse shows urgent need to finalise EU crypto rules, says European Commission").

[**Breaking the cycle**](https://www.financedigest.com/breaking-out-of-the-banking-bonus-cycle.html "Breaking out of the banking bonus cycle")

So, how can the financial services and payments [industries](https://www.financedigest.com/future-of-the-finance-industry.html "Future of the Finance Industry") resolve this growing problem?

By recognising the cyclical nature of fraud prevention. Instead of playing catch up with fraudsters, it’s time for financial institutions to get ahead of the curve by focusing their efforts upstream in the [value chain](https://www.financedigest.com/mussel-extract-market-overview-and-exhaustive-analysis-on-market-segments-supply-demand-value-chain-2022-2029.html "Mussel Extract Market Overview and exhaustive analysis on Market Segments, Supply & Demand Value Chain 2022-2029").

The good news for issuing [banks and payment](https://www.financedigest.com/more-banks-join-european-instant-payments-pilot-from-end-2023.html "More banks join European instant payments pilot from end 2023") processors is that they are starting at an advantage.  They hold vast amounts of data on billions of [payment card](https://www.financedigest.com/fingerprints-supports-two-more-biometric-payment-card-launches-in-the-mena-region.html "FINGERPRINTS’ SUPPORTS TWO MORE BIOMETRIC PAYMENT CARD LAUNCHES IN THE MENA REGION") transactions, from sender and recipient identifiers to merchant category code (MCC), card type, input method and more. All of this data can be extracted for analysis and leveraged in the [fight against fraud](https://www.financedigest.com/why-an-orchestrated-digital-identity-strategy-is-vital-for-financial-organisations-in-fighting-fraud.html "Why an orchestrated digital identity strategy is vital for financial organisations in fighting fraud").

As humans cannot compete with computers when it comes to data interrogation, [artificial intelligence](https://www.financedigest.com/types-of-artificial-intelligence.html "artificial intelligence") (AI) will be the key enabler. That’s why AI holds so much potential – because it [presents an opportunity](https://www.financedigest.com/why-sustainability-presents-one-of-the-greatest-opportunities-for-the-financial-services-industry.html "Why sustainability presents one of the greatest opportunities for the Financial Services industry") to analyse and act on patterns too complex for the human brain to even identify.

AI, though, must be combined with better awareness of how criminals navigate technological and [legal changes](https://www.financedigest.com/hungary-pledges-legal-changes-to-secure-eu-recovery-funding-govt.html "Hungary pledges legal changes to secure EU recovery funding – govt") to commit fraud. Only a combination of best of breed technology and skilled human resource can achieve the wide-ranging analysis needed while also identifying new data [sources](https://www.financedigest.com/exclusive-tiktok-nears-deal-with-oracle-to-store-its-data-sources.html "Exclusive-TikTok nears deal with Oracle to store its data-sources") to include and monitoring for errors in data capture – as the latter are two areas that current AI systems cannot achieve success in without human input.

**Stealing the march**

Any fraud expert worth listening to will tell you that [risk can never be entirely mitigated](https://www.financedigest.com/new-isla-standards-provide-the-foundation-for-resource-optimisation-efficiency-and-risk-mitigation.html "New ISLA Standards Provide the Foundation for Resource Optimisation, Efficiency and Risk Mitigation"). This doesn’t mean that banks shouldn’t go to market with new payment use cases or focus on frictionless user experiences; but that they need an [approach that enables them to evolve ahead of fraudsters and proactively](https://www.financedigest.com/the-importance-of-a-proactive-and-collaborative-approach-to-reducing-contactless-fraud.html "THE IMPORTANCE OF A PROACTIVE AND COLLABORATIVE APPROACH TO REDUCING CONTACTLESS FRAUD") prevent fraudulent transactions.

Investment in [cutting edge AI and human expertise can no longer be ‘nice to haves’ for issuing banks](https://www.financedigest.com/czech-central-bank-vice-gov-unlikely-to-vote-for-rate-cut-newspaper.html "Czech central bank vice-gov unlikely to vote for rate cut -newspaper"). They are necessary if financial institutions are going to fight fraud in the 2020s – and win.

To learn more about today’s threat landscape and what the future will bring for payment fraud, join our [upcoming webinar](https://view6.workcast.net/register?cpak=2475288942116624) on 23rd January.


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