Fraud continues to be a thorn in the sides of banks, financial firms and insurance companies everywhere. As technology becomes more advanced, fraudsters grow more sophisticated right along with it.Businesses have taken action themselves, though, ramping up their own capabilities with ever-more advanced analytics tools to stop fraud in its tracks.
The result is something of a digital arms race, with businesses countering every new development and fraudsters responding in kind. However, if financial institutions and insurance companies don't manage their data analytics programs correctly, key information could be trapped in silos, preventing analysts from identifying fraudulent activity in a timely fashion.
The state of fraud today
The digital age is rife with fraudulent activity designed to bilk financial institutions out of millions, if not billions of dollars each year. According to the Association of Certified Fraud Examiners' (ACFE) 2016 Global Fraud Study, the average organization loses 5 percent of its annual revenue to fraud. The situation isn't any better for the insurance industry, either. The FBI estimates that the total cost of insurance fraud in the U.S. comes out to $40 billion each year, and that's excluding health care-related instances.
The longer a fraud incident drags on, the more expensive it will be.
The pressure is on for organizations to root out fraudsters and minimize fallout from their illegal actions. This is especially true considering the ACFE found a strong correlation between the length of an incident and the total financial cost to the victimized organization. The longer a fraud incident drags on, the more expensive it will be.
Data analytics to the rescue
Given the high stakes and urgency to identify fraudulent behavior, it's no wonder that organizations are turning to advanced analytics solutions to help them combat fraud. When done correctly, data analytics tools can help businesses sniff out illegal activity and prevent lasting financial damage.
However, data analytics is not necessarily a silver bullet in and of itself. Some organizations may run into obstacles getting their solutions properly configured, integrated and optimized for success. Experian Fraud and Identity Solutions General Manager Adam Fingersh explained that system complexity can stand in the way of rapid incident response, dulling the effectiveness of analytics tools.
Businesses that are struggling with these types of analytics issues may want to look toward an external party for assistance. Third-party consultants can assess current setups and environments and make recommendations to improve the efficacy of advanced analytics solutions.
Free your data and the rest will follow
Another pitfall organizations encounter with their data-driven fraud prevention efforts is the existence of data silos. When valuable information is trapped in a particular database or only accessible to specific team members, the effectiveness of an analytics project will inevitably be affected.
Fingersh noted that fraud detection processes can be immeasurably improved by bringing in more data from disparate sources. Breaking down silos and making data more available to analysts allows organizations to get a more complete picture of their fraud threat topography. The more information they have, the more detailed and incisive their analysis and insights will be. Ultimately, by eliminating barriers to data sharing opportunities and erecting bridges between disparate teams, systems and databases, businesses will be able to better spot instances of fraud before lasting damage is done.
Our analytics consultants help get firms get through that final stretch and across the finish line with their data-driven fraud prevention initiatives. With years of experience configuring and optimizing cutting-edge data analytics tools, Clarity's consultants provide the guidance and expertise needed to root out fraud wherever it may lie. Read more about how Clarity may help your organization with fraud and risk analytics.