Last month at Momentum 2024, our highly anticipated fraud panel delved into the critical issue of the shifting fraud liability from consumers to credit unions and banks. As technology and AI continue to advance, they bring both new challenges and exciting opportunities.
The two most upvoted topics were the actions financial services providers (such as credit unions) should take and how they can effectively manage technologies and technology providers. We turned to our panel of experts for their continued insights on these pressing issues.
Actions for credit unions and other financial institutions
Top three strategies to implement to make headway in dealing with fraud:
The first is to establish an efficient governance model, with simple and standard policies and procedures, to build a culture of fraud prevention. This is key, and it doesn’t need to be complex. Consistency and adherence to these policies across the organization are crucial.
Secondly, investing in education with both employees and members should be a priority – transparency for reporting and continuous education about vulnerabilities and new scams will pay out in the long run.
Finally, leverage agility and partnerships to harness technology and shared approaches across the credit union system and other like-minded providers.
How can financial services providers quickly identify and respond to fraud/scams and share that knowledge with each other?
There are two key and simple ways to respond and share knowledge.
The first is to ensure that as a member of the Central 1 Enterprise Fraud Management solution, your institution is accurately and quickly reporting fraud. Once it’s reported in the system, all other members of the “family” benefit and will be protected.
Secondly, encourage fraud victims to report the incident to the (CAFC), which shares this information across the country. The CAFC also provides Central 1 with updates based on reported fraud, which are incorporated into the EFM solution for better fraud detection for the benefit of all who use the service.
Emerging technologies
How can financial institutions prioritize fraud prevention when adopting new technologies like AI, consumer-driven banking (open banking), transitions to cloud services, and real-time payments?
Many credit unions rely on third parties (i.e., fintechs). What do you see as their responsibility in ensuring their service can withstand fraud and scam attacks?
While smaller financial institutions may find it challenging to keep up with technological changes, especially when relying on third parties, there are steps they can take to prepare and adapt.
Credit unions excel at cooperating and leveraging their ability to work together, using that strength to find partners that will work with a consortium of buyers.
By joining together, they can better manage and leverage the technology from fintechs in fraud prevention. These technologies and capabilities are continuously evolving, so consider leveraging the organizations you already collaborate with for shared learning and support.
Finally, credit unions should not hesitate to push back on their third-party partners to do better – open a dialogue and ask questions, collaborate on innovative solutions and look to the value of a service. Evaluate the value of a service by the protection and prevention it offers in combination with its cost. Fraud losses are not just about pure dollars – either to the organization or the consumer – there is a wider cost. Remember, including operational expenses, reputation damage, and future opportunity costs.
What next?
Considering evaluating your approach to technology and partners for fraud prevention? Need some help with planning? Take Central 1’s Fraud Self-Assessment and follow up with your Client Engagement Manager to learn about Central 1’s Fraud Advisory Service, coming in 2025.
