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Home News AI

How AI Can Help Detect Fraud in Banking and Financial Services

Arshi Khan by Arshi Khan
January 27, 2025
AI Fraud detection

Image Source: pixabay

Artificial intelligence (AI) is helping banks and financial companies not only to work better but also to detect fraud and keep customers safe. Fraud is a big problem for these organizations. Every year, people and banks lose billions of dollars in identity theft, fake transactions, and credit card fraud.

Fraudsters, or people who commit fraud, use advanced technology to exploit system vulnerabilities and trick people. A report states that in 2023, there were 500 million scam phone calls each week. Another report shows that fraudsters siphoned over $1.02 trillion globally last year.

The Reserve Bank of India (RBI) annual report shows that bank frauds rose 166% in FY2024. Financial losses worldwide from credit card transaction fraud are expected to reach $43 billion by 2026.

AI can help detect and fight fraud in banking and finance by quickly checking large amounts of transaction data. It can find patterns and unusual behaviors that might indicate fraud.

Here’s how AI is changing the way fraud is detected:

1. Real-Time Fraud Detection

AI technology can process and analyze vast data instantly to detect fraud and encounter suspicious transactions. Unlike old systems that follow fixed rules, AI uses machine learning to discover patterns that might show fraud. For example, if a credit card is used in two different countries in just a few minutes, AI can alert the bank right away.

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2. Better Pattern Recognition

Saccmers and fraudsters often hide their activities by frequently switching regular patterns. AI can easly detect complex patterns. It learns from past data to see what trends are normal and what’s unusual, becoming smarter over time.

3. Understanding Customer Behavior

AI monitors not just transactions but also how customers act with their accounts. It checks when customers login, what devices they use, IP addresses, system type, location, etc., and what transactions they make. If there’s a sudden transfer of a large amount to a new account, the system can warn the bank.

4. Predicting Fraud Risks

AI can guess where fraud might happen in the future by analyzing past data and other factors. This helps banks take steps to prevent fraud before it occurs.

5. AI can Reduce False Alarms

Sometimes, old systems label legitimate transactions as fraud/scam, this confuses and annoys customers and creates extra work. AI helps reduce these errors, meaning real customers face fewer interruptions.

Also Read: Quick Heal Launches Consumer Fraud Prevention Solution, AntiFraud.AI

AI offers robust infrastructure and solutions for analyzing vast amounts of transactional data and can quickly and efficiently recognize fraud patterns and identify abnormal behaviors. AI-powered fraud detection solutions can help detect fraud by looking at the whole picture instead of individual transactions, catching patterns that traditional methods might overlook.

Arshi Khan

Arshi Khan

Arshi Khan is an editor at CXOVoice.com and has over three years of experience in tech business writing. In her role, Arshi covers significant developments in the tech industry. She has contributed numerous articles covering key IT, technology, banking, finance, and cybersecurity sectors. She provides valuable insights into the latest industry trends and developments, establishing herself as a knowledgeable and dedicated editor in the field. She can be reached at [email protected]

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