The methods that criminals use to commit fraud are constantly evolving. In the retail and financial industries in particular, fraudsters’ tactics change regularly and as technology advances, certain schemes may lose or gain traction. Fraud prevention and risk management teams must constantly be on their toes to stay one step ahead.
Having the right tools in place is critical in the fight against fraud, because no one person or team can do it alone. Many businesses deploy multiple anti-fraud solutions in an effort to detect and deter fraudulent activity. Intelligent software can alert you to suspicious behavior far more rapidly than a human being can react, so deploying the right technology can make a world of difference.
In my experience, video-based fraud detection solutions offer a unique advantage over other solutions, because they let you actually see what took place. Video-based solutions have the same powerful ability to search through enormous amounts of transaction data, but with the added benefit of tying transaction data to video images.
A fraud investigator, for example, can use a video solution to not only identify a particular transaction as suspicious, but also to access recorded video to see what took place. They can see who put the empty envelope into the ATM machine, claiming it had cash, or who manipulated the point-of-sale system to conduct multiple fraudulent returns.
Perhaps you already have an anti-fraud solution in place and are tempted to dismiss a video-based solution as redundant or unnecessary. Here’s why you should think twice about making the investment:
Fraud may already be costing you
Whether you realize it or not, fraud may already be taking a bite out of your bottom line. The majority of businesses – 84 percent – reported experiencing fraud last year.
Many businesses, I believe, also have a tendency to underestimate the true financial impact of fraud.
A recent study by LexisNexis Risk Solutions found that for every $1 of fraud a business experiences, it actually costs two and-a-half times – or $2.66 – to deal with that fraud based on associated costs like chargebacks or replacing lost merchandize.
So if a business loses $145,000 to fraud, the real cost to deal with that fraud is actually $385,700!
Some sectors are particularly vulnerable
Some industries are victimized by fraud more than others; these include government, manufacturing, healthcare, education, and retail. The lion’s share of fraud, however, happens in the banking and financial services industries with about 17 percent of all fraud cases.
According to the American Bankers Association’s latest (ABA) Deposit Account Fraud Survey, losses due to fraud in the banking industry reached $2.2 Billion in 2016, an increase of 16 percent over 2014.
Some of the greatest losses for banks were due to counterfeit debit cards and check fraud. Both of these types of fraud involve someone passing off information that is not their own, so a video-based fraud detection solution would be ideal in these cases. Video surveillance that is integrated with transaction data and analytics allows banks and credit unions to rapidly search and sort through ATM or teller transactions, and match suspect transactions with video. This type of solution can help retailers, too, as it can help identify someone using a counterfeit card in a store.
The fallout from fraud is more than monetary
Fraud not only costs your business money, but it can harm your reputation. Consider for a moment the negative news coverage a fraud incident can garner. Then think about the spinoff effect, as existing customers begin to doubt the security of their money or personal data, and potential customers are discouraged from doing business with you. For banks especially, consumer trust is a major asset. If that trust begins to erode, it could harm future growth.
Corporate wide, a fraud incident can have other negative impacts. Labor intensive audits and investigations can hurt employee morale, and the damage to your brand could also hurt your ability to recruit top talent.
Rapid detection is key
When fraud and theft go undetected, the damage can be severe. A study by insurance firm Hiscox found that when employee embezzlement stretched over five years or more, the average loss was $2.2 million.
When coupled with regular audits, video solutions that can quickly alert you to suspicious behavior – like employees accessing off-limits areas, or entering or exiting the office at unusual times – can help you uncover fraud faster. Motion detection and dwell time analytics can be incorporated into a video surveillance solution, giving you the ability to receive notifications about such events.
Worth the investment
When you get right down to it, it’s not hard to see why investing in a video-based fraud solution is so important. Even just one incident of fraud can cost your organization dearly.
While the types of fraud you’re susceptible to depend on the line of business you’re in, there are basic steps each organization can take to protect itself. Regular risk assessments and audits are vital, as is promoting a culture of ethical behavior through training and open communication, including encouraging anyone with concerns to speak up. Adding a video-based solution is another tool you can use in a multi-layered approach to fraud detection and prevention.
Let’s face it. Most organizations need all the help they can get when it comes to fighting fraud.
And as the saying goes, “an ounce of prevention is worth a pound of cure,” and that’s certainly the case with this subject.