Independent Banker - November 2023 - 54

4. FRAUD DETECTION
AND PREVENTION
When banks combine
customer experience with
speed of service, they
must also contend with
the increased risk of fraud. Fraudsters are
getting more sophisticated, with ACH fraud,
check fraud and identity fraud all on the rise.
According to a J.D. Power and Associates
Banking and Payments Intelligence report,
36% of banking customers in the U.S. had
experienced some type of financial fraud
between May 2022 and May 2023.
Any financial institution considering FedNow
implementation must also think about realtime
fraud detection. The risk and compliance
practices must be in place before banks can
allow customers to send instant payments.
Retroactive controls won't be sufficient in a
world of real-time transactions.
While FedNow may stimulate new solutions
around real-time fraud detection, the
technology has been rapidly evolving for years,
especially as banks contend with Know Your
Business (KYB), Know Your Customer (KYC)
and AML regulations and the rise in online
account opening. Outdated tools and processes
can hinder the onboarding process, yet without
the proper identity verification in place, banks
open themselves up to risk.
And far too often, the " standard " practices for
identity verification won't be enough. Fraudsters
can carry out a wider range of fraud schemes
using tools like generative AI.
" Banks should deeply understand how
generative AI could break their existing fraud
prevention processes, " says Kyle Mack, CEO
and cofounder of Middesk, a business identity
platform. " [They] must continuously monitor
their customers to identify changes in risk
profiles, not just verify their identities. "
Technology like machine learning can alert
banks to abnormal account activity, sifting
through millions of data points at a rate
humans could never hope to match. Behavioral
biometrics can analyze mouse activity or typing
patterns, which are very difficult to imitate.
These types of technology can distinguish
between human behavior and an automated
attack or identify behavior that's inconsistent
with the account holder.
Merchants
Bank's data
journey
When Greg Evans started at
Merchants Bank, N.A. in 1989, he
was the Winona, Minn., bank's firstever
internal marketing hire. He
remembers being puzzled that the
banking industry didn't rely more
on its own data.
Today, Evans is president and
CEO of the community bank, a
role he assumed in 2017. " When I
became CEO, I made it clear that
we needed to get serious about
data, data analytics and leveraging
36%
of banking customers in the
U.S. experienced some type
of financial fraud between
May 2022 and May 2023.
Source: J.D. Power and Associates
54 // ICBA Independent Banker // November 2023

Independent Banker - November 2023

Table of Contents for the Digital Edition of Independent Banker - November 2023

Contents
Independent Banker - November 2023 - Intro
Independent Banker - November 2023 - Cover1
Independent Banker - November 2023 - Cover2
Independent Banker - November 2023 - Contents
Independent Banker - November 2023 - 2
Independent Banker - November 2023 - 3
Independent Banker - November 2023 - 4
Independent Banker - November 2023 - 5
Independent Banker - November 2023 - 6
Independent Banker - November 2023 - 7
Independent Banker - November 2023 - 8
Independent Banker - November 2023 - 9
Independent Banker - November 2023 - 10
Independent Banker - November 2023 - 11
Independent Banker - November 2023 - 12
Independent Banker - November 2023 - 13
Independent Banker - November 2023 - 14
Independent Banker - November 2023 - 15
Independent Banker - November 2023 - 16
Independent Banker - November 2023 - 17
Independent Banker - November 2023 - 18
Independent Banker - November 2023 - 19
Independent Banker - November 2023 - 20
Independent Banker - November 2023 - 21
Independent Banker - November 2023 - 22
Independent Banker - November 2023 - 23
Independent Banker - November 2023 - 24
Independent Banker - November 2023 - 25
Independent Banker - November 2023 - 26
Independent Banker - November 2023 - 27
Independent Banker - November 2023 - 28
Independent Banker - November 2023 - 29
Independent Banker - November 2023 - 30
Independent Banker - November 2023 - 31
Independent Banker - November 2023 - 32
Independent Banker - November 2023 - 33
Independent Banker - November 2023 - 34
Independent Banker - November 2023 - 35
Independent Banker - November 2023 - 36
Independent Banker - November 2023 - 37
Independent Banker - November 2023 - 38
Independent Banker - November 2023 - 39
Independent Banker - November 2023 - 40
Independent Banker - November 2023 - 41
Independent Banker - November 2023 - 42
Independent Banker - November 2023 - 43
Independent Banker - November 2023 - 44
Independent Banker - November 2023 - 45
Independent Banker - November 2023 - 46
Independent Banker - November 2023 - 47
Independent Banker - November 2023 - 48
Independent Banker - November 2023 - 49
Independent Banker - November 2023 - 50
Independent Banker - November 2023 - 51
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Independent Banker - November 2023 - 53
Independent Banker - November 2023 - 54
Independent Banker - November 2023 - 55
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Independent Banker - November 2023 - 63
Independent Banker - November 2023 - 64
Independent Banker - November 2023 - 65
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Independent Banker - November 2023 - 77
Independent Banker - November 2023 - 78
Independent Banker - November 2023 - 79
Independent Banker - November 2023 - 80
Independent Banker - November 2023 - Cover3
Independent Banker - November 2023 - Cover4
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