Using AI for Fraud Detection and Prevention

Can you rely on AI to keep your company safe from fraudsters? It's time to find out! In this article, we look at the ways of using AI for fraud detection and prevention and the benefits and concerns surrounding this practice.

The world is already highly reliant on online environments, and many are leveraging this momentum to make a positive impact. But where there's light, there's also darkness.

The current highly digitized landscape also allows cyber fraudsters to exploit businesses' vulnerabilities. So much so that, according to Statista, the worldwide cost of cybercrime will likely skyrocket in the coming years, going from $8.44 trillion in 2022 to $23.84 trillion by 2027!

This gloomy prognosis implies that traditional methods, such as the rule-based method, can't keep up with the scale and severity of modern fraud attempts. Companies must adopt an advanced approach to detect and prevent highly sophisticated threats.

That's where AI comes into play.

AI as a game changer in cybersecurity

AI elevates fraud management to a whole new level. That’s because, unlike old rule-based systems, AI allows for real-time processing and automatic fraud detection. Furthermore, AI learns from prior data and can adapt its rules to prevent future attacks, including those that the company has never encountered.

The most significant change AI brings is the introduction of far more scalable and cost-effective solutions. Earlier approaches become more expensive to maintain as data sets and client bases expand. Conversely, AI "learns" and gets more effective as data sets grow, with no additional maintenance costs.

The best AI cybersecurity solutions are lightweight, fast, and dynamic, making them a perfect match for today's rapid and high-threatening fraud attempts.

How AI helps businesses in fraud detection and prevention?

Let's take a closer look at how adopting AI for fraud detection and prevention might benefit companies.

→ Improves account security

If you're on any social network, you've probably come across countless fake accounts. However, this type of fraud doesn't only threaten giants like Facebook and Twitter ― it may also knock on your business’ door. Falsifying your product reviews, sharing false information, and spreading malware are just a few of the possible threats that can stem from fake accounts.

Captcha codes and other conventional security measures fall short of stopping the creation of fake accounts. Additionally, they increase the friction for genuine users to create their accounts. On the other hand, AI increases security without these drawbacks. It detects and blocks harmful bots while enabling a smooth engagement process for real users.

→ Detects suspicious behaviors

Analyzing user behavior is another common application of AI for fraud detection and prevention. It looks at users' activities, device types, geographic locations, and other important criteria. Then, AI develops a "profile" for each user. These profiles update with every action, and if a user's behavior deviates from their profile, it may indicate potential fraud.

Thanks to its behavioral analytics, AI can also serve as a "virtual assistant" for regular business activities and fraud protection. It can aid in marketing campaigns, provide customer service, and answer common queries. For cybersecurity purposes, AI enhances the verification processes by authenticating users' identities before granting access to sensitive information.

→ Provides quick responses and reliable insights

Fraud detection and prevention require a quick response, and AI excels in this field. It helps digital enterprises that offer virtual products to deliver a more consistent customer experience. For instance, AI enables gaming platforms to allow the instant purchase of tokens by accepting transactions instantaneously. There's no lengthy verification process, letting users have a straightforward, high-quality gaming experience.

AI systems can also flag suspicious activities for further investigation, allowing engineers to focus only on the most vital instances. You also gain reliable insights about potential threats by utilizing learning algorithms. This way, companies receive real-time fraud detection, accurate predictions, and the ability to streamline cybersecurity-related processes, saving time and resources.

Potential challenges of using AI for fraud detection and prevention

Now that we've seen various uses and benefits, let's see the main concerns surrounding AI for fraud detection and prevention.

As with any other technology, AI isn't immune to false positives, which occur when the system incorrectly identifies legitimate activity as suspicious. Therefore, although it can decrease false positives to a bare minimum, there's a probability that algorithms will occasionally block legitimate users (particularly those who use unusual browsers and VPNs).

The best way to combat false positives is to train your team's engineers or opt for analysts from IT staff augmentation services to view alerts and, if necessary, alter system functions.

Another challenge is keeping up with the fraudsters' ever-evolving techniques. The hard truth is that cyber scammers will keep coming up with new ways to commit fraud. So, to keep pace with the latest fraud strategies, always have your AI systems up-to-date.

AI for fraud detection and prevention: a promising tool

In the past, traditional static solutions were enough. But, with today's rapid and sophisticated online fraud threats, they can't protect your organization for long. Furthermore, users continue to seek companies that provide a good user experience. They expect brands to offer environments where sharing personal and financial information is safe and convenient.

Therefore, you need a fraud protection solution capable of adapting to modern cybersecurity threats. And what better solution than one that learns and adjusts quickly and effectively?