How an open API platform can improve the agility and effectiveness of your fraud management strategy

How an open API platform can improve the agility and effectiveness of your fraud management strategy

Fraud is increasingly taking place online, with official identities[1] being one of its primary targets. Fraudsters do this through account origination (using stolen legitimate data to create fake accounts), account takeover (using this stolen data to control actual accounts), and synthetic theft (a blend of the two prior types). With digitisation and the Internet of Things (IoT) making the world even more connected and automated, it's now much easier for fraudsters to pilfer any identifying factors. 

 

Their fast and methodical approach to fraud contrasts with businesses’ overall readiness to combat it. Up to 40% of fraud-related business decisions are backed by “opinion and gut feeling,” and 50% say they cannot glean relevant insight from their data for decision-making. As fraud cases go up, customer trust in businesses goes down along with their profits. 

 

Your business can respond in two ways. You can create your own fraud detection and management platform, which requires significant resources, testing times, and talent. Or you could leverage the power of platforms to customise a fraud management system that suits your specific needs.

 

Platformisation is the way forward

Platformisation[2] is an increasingly common approach adopted by businesses to facilitate rapid scaling, adaptation and innovation. Here, multiple functions and services (both internal and from third-party services) are pulled into a single platform. This platform is then served up to businesses as the sole source of truth that improves visibility and accelerates decision-making processes. 

 

A good example of platformisation would be current ‘super apps’ like Grab and WeChat. Users  only need to access one app to perform multiple tasks, including chatting, shopping, booking private transportation and point-to-point deliveries.

 

These super apps build their platforms using a mix of in-house features and application programming interfaces (APIs) that connect other companies’ systems with theirs. There can be restrictions on which companies receive access or what features can be added or amplified.  Or there can be no restrictions at all, which is called the open API model.

 

The open API framework has gained traction throughout the years, particularly in banking. Hong Kong is an early adopter, with the Hong Kong Monetary Authority (HKMA)[3] making its open API framework publicly available in 2017. Any financial institution (and its developers) can now work with standards in place and develop apps linking banking institutions together to collectively offer their services.

 

Other examples[4] of financial institutions going for the open API approach include Singapore’s OCBC[5], DBS and Standard Chartered; Malaysia’s Maybank; and the Philippines’ UnionBank.

 

The case for an open API fraud management platform

The open API model offers businesses three major benefits.

 

1. Agility and adaptability

Platformisation yields multiple possibilities and gains for both businesses and customers. In the case of digital fraud, it’s not as common for businesses to platformise their fraud management strategy. However, it is the method that best matches the agility, effectiveness, and speed of fraud. 

 

Having an open external platform all ready to go with updated third-party APIs (like Experian’s plug-and-play CrossCoreTM platform) offers another long-term benefit: it helps your business become proactive and respond to threats with right-sized solutions.

 

“Right-sizing” at the start leads to huge cuts in various indicators at the account-opening stage. Experian’s 2017 whitepaper[6] shows that having a right-sized solution in place for your fraud team cuts manual reviews down by 49%, reduces 88% of missed fraud cases and fraud attempts by 48%, and pushes false positives down by 50%. Actual fraud detection is also boosted to as much as 78%.

 

With an open structure, businesses can tailor their platforms to fit any business strategy for fraud and accommodate any API (whether it’s by Experian or other companies)—and without the bloat. When you need to add new services or replace others, you can easily integrate them into your platform and adapt a lot quicker to fraudsters’ latest techniques. 

 

2. Single source of truth

The difficulty in enforcing effective fraud detection and management is often due to the use of multiple siloed solutions. This separation leads to multiple outcomes or ‘truths’ that can mislead people to identify legitimate actions as fraudulent. 

 

As a result, the business could make inaccurate or hasty decisions and shut out real customers, 83%[7] of whom report feeling upset and betrayed whenever this happens to them. That’s a huge percentage of folks who will remember “that one time” and most likely won’t come back again.

 

Placing all of your fraud detection services onto one platform empowers you to fight fraudsters at the same tempo. Moreover, it delivers one data-supported truth, not multiple versions of it. In the business of fraud detection, that singular truth is what matters most.

 

3. Plug-and-play platform offers access to best-in-class technology

In the complex and fast-evolving world of fraud, it is challenging to pinpoint just one tech-driven solution that can support all the business needs. Even so, that solution would require constant updating to remain relevant, thorough, and secure. 

 

Implementing a plug-and-play or open API platform for fraud protection and management means you can proactively allow other reputable firms and service providers to contribute their respective strengths without conflict. Under normal circumstances, they would compete with one another and have no way of working together at all. You also don’t need specialised tech know-how or exorbitant costs to achieve this task. With open APIs, there’s no downtime, no legacy systems, and certainly no mismatches!

 

An open platform for an open world

While customers become more reliant on digital services with a global scale, fraudsters see countless opportunities to exploit unprotected areas on the business side. They continually evolve as you play catch-up and the costs mount up… literally. 

 

A Juniper Research whitepaper[8] projected a US$50.9 billion cumulative spend on fraud detection and prevention software between 2017 and 2022. That’s expensive, but the cost of losing business due to isolated and ineffective fraud protection solutions will always be greater.

 

Open API platforms are needed to keep pace with the rising speeds and complexities of fraud and identity theft. More importantly, they can give you a wider view of your customers, make better decisions and analyses based on all available data, and prepare you for future developments.

 

References:

  1. The Evolution of Identity
  2. Platformisation is the scaffold that helps startups build their business faster
  3. Open Application Programming Interface (API) for the Banking Sector
  4. Open Banking In Asia
  5. Experian API Enables Faster OCBC Business Account Opening
  6. Aligning your team to fight rising fraud threat
  7. 5 reasons to protect your organization from fraud
  8. Online Payment Fraud whitepaper - Juniper Research

Read full article

Experian

By Experian 06/22/2020

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