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The Imperative for Rapid Response to Emerging Threats

Continuous improvement, adaptation to emerging threats, and a holistic approach to fraud prevention are essential.

The surging sophistication of transaction fraud poses substantial financial and reputational threats.

Implementing policy rules for fraud detection can be a complex task, and several hurdles and challenges can arise during the process. One of the biggest hurdles in implementing policy rules for fraud detection is data quality. The quality of the training data used to create and update policy rules is crucial. Inaccurate, incomplete, or outdated data can lead to too many false positives or false negatives.

In addition to this, there are other factors that should be carefully considered when selecting the optimal approach for implementing a comprehensive fraud detection solution. Here, we list the most important factors:

  1. Volume of data: dealing with a high volume of data can be challenging. Most of the existing solutions deal with this situation by executing rule policies as a part of the ETL process (so called batch mode), making it hard to change, and impossible to integrate with real time payment systems or AI/ML models.

  2. Model Overfitting: When creating ML models for fraud detection, there is a risk of overfitting the model to the training data. Overfit models may not generalize well to new, unseen data, leading to poor detection performance.

  3. Adaptive and Evolving Fraud Techniques: Fraudsters continually adapt their methods to avoid detection. Static policy rules may become obsolete as new fraud techniques emerge. Implementing rules that can adapt to changing fraud patterns is essential, which brings us to the next one in this list:

  4. Real-Time Detection and Prevention: Many fraud scenarios demand real-time detection and response. Implementing policy rules that can operate in real time and make instant decisions can be technically complex and resource-intensive. Therefore, stream rules processing, as described in this blog is a paramount.

  5. False Positives and Negatives: Striking a balance between minimizing false positives (legitimate transactions classified as fraudulent) and false negatives (fraudulent transactions classified as legitimate) can be challenging. Overly stringent rules may result in more false positives, which can frustrate customers, while overly permissive rules may lead to more false negatives, allowing fraud to go undetected.

  6. Regulatory Compliance: Compliance with industry regulations and legal requirements, such as GDPR or PCI DSS, can be a challenge when implementing fraud detection policies. Organizations must ensure their rules and procedures align with these regulations while still effectively detecting and preventing fraud. That condition alone makes it a hard to implement rules based on AI models alone!

  7. Collaboration and Communication: Effective communication and collaboration between various departments (IT, risk management, legal, subject matter experts and customer support) are vital for implementing fraud detection policies successfully.

To address these hurdles, organizations should look for payment solutions that employ a combination of rule-based systems, machine learning models, with ongoing monitoring and adjustment of their fraud detection policies. Continuous improvement, adaptation to emerging threats, and a holistic approach to fraud prevention are essential.

Similarly, Low-code platforms such as FraudAway enhance communication by offering visual representation, rapid prototyping, real-time collaboration, and simplified documentation. They enable cross-functional teams to collaborate effectively, leading to quicker iterations, reduced miscommunication, and improved integration with existing systems, resulting in more efficient and responsive communication throughout the development, testing and deployment process.

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