Fraud occurs in all industries, but the damage it causes differs depending on the industry. However, the detection and prevention of fraudulent activities have become easier with data analytics. Traditional methods, in contrast, are labour intensive and rely heavily on the expertise of skilled individuals. As fraudsters are becoming increasingly tech-savvy, protecting data and identifying fraud is more challenging. It has become imperative to improve fraud detection and prevention techniques to address this issue.
Let’s see how data analytics is helpful in fraud prevention.
Preventing fraud with data and analytics: Advantages
Data analytics technology has advanced considerably over the past few years. Tracking and preventing fraudulent transactions and activities are among the most effective uses of data analytics. Let’s see how it helps in fraud prevention.
Uncovers hidden data patterns
Data analytics helps identify data patterns and trends that could eventually help identify possible fraud activities on the way.
Integration of data
Combining data from different sources helps create a model that will make the process easier for fraud detection.
A better methodology
It helps improve the effectiveness of conventional methods of fraud detection and prevention. Rather than being an alternative to the traditional methods of fraud analytics, it has helped combine both advantages.
Easier review of unstructured data
Unstructured data is usually the source of fraudulent activities. Text analytics is a helpful way to identify and deal with such fraudulent activities.
How does data analytics help?
Although data analytics can help prevent fraud, how does it work? The answer is that two types of testing lead to the desired results – Adhoc testing and continuous testing. Let’s dive into the main points of these two processes.
Adhoc testing is performed only in response to a requirement. It has some disadvantages when compared to continuous testing. Once the testing is done, it will be possible to get an insight into the issue and the possible threats it could lead to. These reports and insights aren’t enough to make better decisions and are the main drawbacks of Adhoc testing. It needs human supervision and is highly time-consuming. If it is not performed regularly, there is a possibility that the system will miss an anomaly, which is yet another fact that makes continuous monitoring a better option.
Automated scripts run in continuous succession through the system and detect threats through continuous testing. An in-depth scanning is done by running automated scripts in a continuous loop. The repetitive scanning process helps detect anomalies at the right time. It ensures that all possible hazards are detected and resolved at the earliest, thus helping organisations to maintain efficiency and productivity.
Technology tools powered by data science are becoming feasible for organisations, especially in the banking sector, to identify and mitigate fraud risks. An analysis of data enables you to gather and save huge amounts of data that help in fraud detection. Furthermore, it gives a comprehensive view of the data patterns and thus makes it easier to spot the red flags. In a nutshell, data and analytics is a game-changing technology in this data-oriented digital world.