Each year, financial fraud adds up to billions for merchants, consumers, and banks. Artificial Intelligence (AI) is the newest and arguably most effective weapon in the war against financial fraud. In this article, Daniel Calugar, an experienced investor with a background in computer science, business, and law breaks down the top ways in which AI can protect your account from falling victim to fraud.
AI can help combat fraudulent expenses and unauthorized banking access by preventing fraud before it even happens. Suspicious charges can be flagged before any losses occur on either the merchant side (product loss) and the consumer side (monetary loss). It does so by using a combination of proactive techniques.
Predicting Spending Patterns
AI can dig much deeper into the roots of consumer behavior by looking at historical data. It can analyze a vast range of information regarding past purchases – geographical locations, dollar amounts, and purchase frequency – to find financial patterns. It will then set up rules for your future spending.
When financial activities occur that are in direct opposition to those rules, AI can instantly alert your financial institution. The bank or credit card company can then decide whether to accept or reject the payment in real-time. This is why, for example, you are encouraged to let your bank know if you will be using your credit card outside of your home country – so that the AI rules can be adjusted and transactions can continue smoothly.
By revealing anomalies in your spending patterns before they are approved, AI makes it more difficult for fraudulent charges to take place in your account, saving you the time and effort of fighting those charges later.
Real-Time Consumer Alerts
Before AI, consumers would not be made aware of fraudulent financial activity until they received their banking statement – often weeks after the fraud had occurred. This made it much more difficult to stop fraud and recover lost money. Now, with AI, this is something that can be resolved within minutes, if not seconds.
If AI notices a transaction outside of your typical spending pattern, it can alert you instantly. It can also let you know if a new device has accessed your account. Armed with this information, you can then report the fraudulent activity to your financial institution. This will put an immediate stop to the possible fraud and prevent any monetary loss on your part.
Ending Deceptive Online Practices
Deceptive websites and click-through phishing ads are becoming widespread tactics for online fraud. Many of these are indistinguishable from the legitimate companies you conduct business with. AI can be used to spot criminal intent. Often, AI will not just flag one illicit site but rather recognize, via IP addresses, regions prone to fraudulent practices.
Once a website or ad has been deemed as potentially fraudulent, alerts will warn you that a site is not secure or that it cannot be confirmed before you get to the website itself. This proactive approach will prevent you from even clicking through, much less entering sensitive financial information.
Being the victim of financial fraud can be stressful. But with ever-evolving AI on your side, these losses can become less common-place.