Banking and Financial Services

Fraud detection using machine learning

How banking industries can use machine learning to improve the speed and accuracy of fraudulent transaction & activity detection, with the AI & Analytics Engine.

Fraudulent transaction and activity detection

Banking industries face a growing problem of fraudulent transactional activities. These activities require significant financial resources to detect, flag, and evaluate. As online transactions increase, so too, has the volume and velocity of fraudulent online transactions and the need to deal with them accurately and swiftly. If the trend persists, by 2025, there could be a worldwide loss of close to USD 44 billion due to fraud.1

Banking industries that leverage machine learning (ML) based fraud detection can empower their decision-makers with the ability to make informed decisions to stop fraud, before it impacts the business’s bottom line and the overall brand.


A traditional rule-based approach to fraud detection

There are already processes in place in financial institutions to detect, flag, and evaluate fraudulent transactions. Traditionally, these processes have been rule-based. Whilst rules remain important to an anti-fraud approach, there are drawbacks, the approach is often resource-intensive, manual, difficult to scale, and prone to human error.

Some of the issues driving these drawbacks include:

  • False Positives: The more rules, the higher the chance of false positives. This can block genuine customer transactions, negatively affect a customer’s experience and require costly human intervention.
  • Fixed Outcomes: Fraud thresholds are changeable, which means rules become invalid quickly.
  • Inefficient & Hard to Scale: As fraud evolves, so too must the library of rules. This slows systems and is a burden to fraud analyst teams.

The current challenges can be addressed and overcome by incorporating ML into fraud detection processes. Banking Indsutries stand to improve both the accuracy and speed of fraud detection and flagging, saving significant resources and mitigating downstream handling and brand damage.

For other relevant use cases, check out our article on the Top 18 essential AI Use Cases in Leading Industries!


The Solution: ML-based fraud detection

With time and labor being finite resources, quick and accurate real-time detection of potentially fraudulent transactions allows for cost and time-saving benefits. Machine Learning, when applied to fraud, provides the analytic powers to identify patterns and help stop fraudulent activity before the crime impacts a financial institutions bottom line.

The advantages of using ML in a fraud solution include:

  • Predicting future fraudulent transactions while reducing human error.
  • Greater speed in risk assessment by efficient pattern identification in data.
  • Increased automation, leading to a reduction of resources required for manual tasks.
  • Increased accuracy of identifying “good” vs. fraudulent transactions reducing false positives1, negative user experience, and downstream human intervention.
  • Efficient resource utilization, as models are updated with new data and features over time.

Machine Learning based approach to detecting fraudulent transactions


Simplicity with the AI & Analytics Engine

The AI & Analytics Engine is a automated machine learning platform, which easily integrates into existing systems and processes to provide ML-based fraud detection capability. The Engine enables banking institutions to ingest and analyze large datasets of historical transactional data, to provide accurate data-driven predictions on future fraudulent transactions.

80% of fraud specialists have seen AI-based platforms reduce false positives, payments fraud, and prevent fraud attempts.2


Benefits of the ML approach with the AI & Analytics Engine

  • Fast, affordable setup and easy ongoing management of ML models
  • Near real-time fraudulent detection
  • Improvement in accuracy of ML models over time (reducing false positives)
  • Reduction in complex rule-based approaches, giving bandwidth back to employees





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