FICO announced a new solution in FICO Fraud Manager that utilizes behavioral analysis and other signals to prevent P2P fraud. Fintechs have been doing this for years.
Mastercard acquired NuData, LexiNexis acquired Threatmetrix, while BioCatch and others continue to go it alone. The Fintechs have been in market for several years and have used that time to hone their machine learning algorithms.
For example, BioCatch claims to detect 5 different unique forms of criminal mule activity that impact accounts. It will be interesting to see if the FICO solution is equal to the Fintech solutions from the perspective of price/performance:
“Alternatively, should a consumer use her bank’s mobile app on her own phone, but sends funds to a new account, the likelihood is 10 times greater that she is falling victim to an APP scam, Zoldi adds. When it comes to consumer’s favorite devices, the Scam Detection Score identifies 24 times more scams than the standard fraud score, FICO says.
What makes APP scams more difficult to detect is that they use social-engineering techniques to trick consumers into sending money from a personal account to an account controlled by the criminal for what consumers believe is a legitimate reason. “This means that the model must look for subtle patterns that point to … what legitimate customers do when being misled by criminals,” Zoldi says. “The typical hallmarks of third-party fraud that look out-of-pattern don’t necessarily exist for APP scams.”
Criminals enacting a push-payment scam may reach out to victims through mobile games, online shopping sites, and social media. Online gaming users, for example, may believe they are paying for a rare item. Or online shoppers may believe they are buying a legitimate product. With social-media scams, criminals have been known to spend months grooming victims through online conversations, developing a relationship with the target before asking for money to deal with a fictional emergency.
“Whatever the platform, victims believe they are receiving a legitimate service, product, or benefit,” Zoldi says.”
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group