Don’t Just Detect Fraud – Predict and Prevent It to Build Member Trust

Year-over-year, fraud events have increased by 25% with total losses forecasted to hit record highs in a few years, according to the Federal Trade Commission and ACI Worldwide, respectively. Your members have likely already experienced them personally. Whether they provided personal details to a bogus website or made an untimely purchase from a fake TikTok store, scams are everywhere and cardholders must stay vigilant to prevent falling for one.

Thanks to artificial intelligence, fraudsters are getting craftier. To stay ahead of bad actors, credit unions must harness the power of predictive analytics to safeguard their membership at scale. The shift – from chasing fraud after it strikes to detecting patterns days in advance – can save a mid-size credit union thousands of dollars per compromised card, protecting their bottom line, and more importantly, preserving the trust that keeps their members loyal.

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It takes an arsenal of tools to fight against the dark art of fraud. Current practices among credit unions are largely reactive, focusing on remediation after incidents occur, rather than enabling predictive insights that could mitigate risks at scale. Enhancing their tool kit with AI and machine learning to uncover potential fraud patterns or risks allows faster response times to mitigate issues. As threats evolve, predictive and proactive fraud technology is the next step in protecting members’ assets, trust and long-term financial well-being.

The Modern Fraud Landscape

Fraud is personal. When a fraudulent event occurs, it is invasive and disruptive to the member’s life and often leaves them with trust issues. Consumers count on their financial institutions to help defend them. FICO reported that 77% of cardholders expect their bank or credit union to have some type of fraud prevention software. Of those, some indicated that they’d leave their financial institution if they think prevention measures fall short.

Fraud-fighting tools like device and IP tracking or behavioral and pattern analysis might already be a part of your portfolio. Most credit unions also use multi-factor authentication and rule-based fraud prevention, counting on predefined “rules” to detect and block suspicious activity from merchants with high fraud scores.

Consider all of that a good start.

These tools are smart, and are getting smarter, but credit unions are still seeing skyrocketing fraud rates on top of their existing detection and prevention measures. The truth is, those tools are performing the function they were designed to do, which is catch known threats. Fraud techniques, however, have evolved beyond known threats, heightening the need to spot patterns and anomalies in real time – often before a scam even happens.

This is the level of protection members need to feel safeguarded, and quite frankly, the standard of care they expect from their credit union.

A New Era of Risk Defense

Predictive analytics are changing the game. These low-touch platforms can analyze millions of card transactions daily. They provide quick, powerful insights into suspicious activity – all before a breach is discovered.

These are the measures members expect their credit unions to take.

Powered by anonymized consortium data that includes the world’s largest financial institutions, these platforms detect patterns and flag high-risk merchants and attack trends, so your team doesn’t have to. Many also allow for customizable AI-driven rules based on a credit union’s unique risk appetite.

Now, in real time, credit unions will learn which members’ cards have been compromised and their likelihood of experiencing fraudulent activity. Instead of reissuing cards to members every time a fraud incident occurs, you’re identifying the ones most at risk and reissuing cards accordingly. That alone could save thousands of dollars.

Think of predictive analytics as a catch-all for the copious amounts of fraud in the market today. By automating detection and delivering instant insights, predictive fraud tools reduce manual effort, speed up response times and save both time and money – giving your team more room to address bad actors before they reach your members’ wallets.

Pairing Education With Innovation

Credit unions should realize they have a unique edge when it comes to fighting fraud. They may lack the fraud teams of larger institutions, but their smaller size often makes them more agile. Being able to rapidly adapt to emerging threats is key, as is being able to pivot and quickly implement fraud solutions tailored to their members.

Members want to know what credit unions are doing for them – and credit unions should tell them. Once an advanced fraud toolkit is in place, credit unions must educate their members on its benefits to ensure peace of mind. Education builds trust and loyalty – tell them about your investments in fraud detection and prevention, inform them of the latest scams, and keep them up to date on how to protect their financial security and what you’re doing on their behalf.

Combining education with innovative and proactive fraud-fighting technology helps you build loyalty and show members you’re not just responding to threats – you’re staying ahead of them, together.