Technology
Facial recognition is the best tool to tackle the increase in financial fraud
Global Banking and Finance Review
Company
By Anton Nazarkin, Global Development Director at VisionLabs
Financial fraud is on the rise and costs banks billions of dollars a year. Between 2016 to 2020, synthetic fraud[1] losses grew from $6 billion to $20 billion[2]. Moreover, more than half of senior banking officials stated they recovered less than 25% of fraud losses in a recent KPMG survey[3].
Bank fraud is becoming a pervasive issue requiring banks to invest in fraud prevention technologies. Fraud prevention protects banks and their customers whilst allowing for resources to be focused on other areas. While some facial recognition softwares fall short in accuracy and anti-spoofing, it is not true of all solutions. VisionLabs’ unmatched level of accuracy delivers great customer experience and protection, and when implemented by banks it becomes the most powerful asset in fraud prevention.
Payments – a key battleground
Chargeback fraud[4] is a prevalent form of fraud. According to a recent study, merchants lose $2.40 for every $1 a fraudster takes through chargeback fraud.[5] Banks have developed fraud investigation departments and often aid in covering financial losses which leads to draining their resources.
Facial recognition within the payments process can almost completely eradicate chargeback fraud as the identity of the purchaser is confirmed. Technologies with high accuracy and strong liveness provide a seamless experience for the customer and protect all parties’ money.
Facial recognition can also be adopted by banks as verification for online shopping through banking apps, and web-based access, to reduce fraud. This provides fraud prevention for the full journey, from Know Your Customer (KYC) to face payments.
Wiping out identity fraud
Identity fraud continues to be a challenge for the global finance industry with recurring substantial losses.
Fortunately for financial institutions, high-level facial recognition technology is offering the ultimate protection against identity fraud. Facial recognition can reduce fraud in digital banking through mobile apps and web-based access but also at ATMs, self-service kiosks and in-store. Not many technological solutions can boast such all-around protection. However, it is important to note that highly accurate software is necessary to ensure that identity fraud doesn’t occur – yet, some solutions today still fail to meet the minimum threshold.
VisionLabs can process customer faces in milliseconds across still images and video with great precision. Other features, such as the liveness check can pick up a fraudster’s attempt to bypass this technology. Subsequently, financial institutions can confidently verify that customers are who they say they are.
If fraudulent activity does occur, facial recognition can play a vital role in post-fraud proceedings as the technology can confirm the identity of the individual and be used in legal proceedings. Unfortunately, banks expect financial losses from fraud and have built this into their budgets but with facial recognition, they would be able to re-evaluate these budgets as a facial recognntion solution would mitigate much of these losses.
Fraud prevention can be mitigated by the development of a fraud database. Multiple government agencies can provide the service of supplying a biometric database of fraudsters. Financial institutions can cross-check the identities of their customers, and potential new customers, against this government database. If a fraudster attempts to use a bank’s services, they can be identified and prevented from causing any harm.
Dispelling the myths
Even with our modern technologies, cynics believe that deep fakes and silicon masks can be created to bypass facial recognition. The news and social media may portray this as the next big issue but technologies such as VisionLabs offer a solution to this challenge.
Despite some fears, facial recognition technology is already a popular consumer and business choice. One of the leading regions for implementation of facial recognition is the UAE, which seeks to be at the forefront of new technologies. The UAE has integrated facial recognition into airport security, policing, public transport and financial services. In fact, Emirates NBD Bank PJSC in Dubai currently uses VisionLabs’ technology for their mobile banking, allowing customers to open accounts and new services using their facial biometric. The UAE is not alone however, the USA has also seen great developments in recent years for the use of technology in banking and financial services.[6]
Fraud is rising, harming merchants and financial institutions with every new case. We believe the most powerful tool in the industry is high-quality facial recognition technology, and that the implementation of it will prevent vast swathes of fraud at the source across multiple use cases from chargeback fraud, to identity fraud and its many offshoots. Through its high accuracy in identity verification and features such as one-shot liveness, financial institutions and merchants can rest easy knowing that new technology can prevent fraudsters from causing harm and financial damage.
[1] the use of a combination of personal information to fabricate a person or identity to commit a dishonest act for personal or financial gain
[2] https://f.hubspotusercontent40.net/hubfs/19615545/FILES%20FOR%20DOWNLOAD/FiVerity%202021%20SIF%20Report%2010-2021.pdf
[3] https://home.kpmg/xx/en/home/insights/2019/05/the-multi-faceted-threat-of-fraud-are-banks-up-to-the-challenge-fs.html
[4] where an individual claims a purchase was made using their account by a third party in order to have funds returned
[5] https://www.expertmarket.co.uk/merchant-accounts/chargeback-fraud-statistics#:~:text=Each%20year%2C%20the%20global%20average,chargeback%2Dto%2Dtransaction%20ratio.
[6] https://www.americanbanker.com/news/facial-recognition-tech-is-catching-on-with-banks
Financial fraud involves deceptive practices aimed at obtaining money or assets unlawfully. It can take many forms, including identity theft, credit card fraud, and investment scams.
Facial recognition technology uses algorithms to identify and verify individuals by analyzing facial features from images or video. It is increasingly used in security and fraud prevention.
Chargeback fraud occurs when a consumer disputes a transaction with their bank, claiming it was unauthorized, to get their money back, often leading to losses for merchants.
Identity fraud involves the unauthorized use of someone else's personal information, typically to commit financial crimes such as obtaining credit or making purchases.
The KYC process is a regulatory requirement for financial institutions to verify the identity of their clients to prevent fraud and ensure compliance with anti-money laundering laws.
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