“Disruptive Approaches Are Driving Change” Derek Dempsey On The Fraud Industry: Part Two

Rosalind Madge our consultant managing the role
Posting date: 2/28/2019 9:40 AM




This is the second part of our interview with Derek Dempsey, Fraud Analytics Director for FICO. To read the first part click here.


How have Data & Analytics impacted the detection, and prevention, of Fraud? 

Big Data is interesting. We want to use as much Data as possible but you have to be sure the Data you have is reliable and robust. Bad Data could lead to significant issues for anyone in Fraud detection. 

But really, Data & Analytics are the fuel that drives effective Fraud detection. Our world has used these tools very effectively for many years and we have always been at the forefront in the use of new techniques. Effective Fraud detection relies heavily on using the best Data available and the right analytical techniques to extract useful information. Furthermore, it is constantly evolving as more information becomes available. 

What impact do you think Machine Learning and AI can have on Fraud prevention and detection? 

In the last few years we’ve seen an explosion of new interest and new techniques, with lots of new players coming into the market. 

Companies like FICO have been using Machine Learning for Fraud detection for 25 years so this isn't new. What is new is a whole generation of new technologies, new companies and disruptive approaches that have been driving change. 

For us, apart from increased competitive pressures, one of the other big changes is that companies have built large Data Science teams and have a bigger appetite to build their own solutions using open source technologies. However, it’s one thing building these great models, it’s another getting them to operate effectively and correctly in the real world. The level of governance that we are subject to is enormous just to make sure that our models perform as they should. This will be a challenge to the newcomers. They are here to stay though, and should drive better performance and better Fraud detection. 

Where AI techniques are set to make an impact is in AML and compliance monitoring. These have used rule-based techniques due to regulatory pressures, but it is clear that more advanced techniques are required to provide better detection of money laundering and terrorist financing. However, businesses do require us to provide explainability but regulators are saying the will look favourably on AI usage if it can provide this. The more AI techniques are used, the more this issue of explainability is going to be important. 

Why is the development of analytics, tools and techniques so important within different industries?

I think domain knowledge of the Data and business will always be important. 'Specialisms' occur and always will. The analytic techniques, the tools and languages can be standard although some are more appropriate for different specialities. However, the differences in Data and business model always results in specialised applications to address this. 

For example, something like Card Fraud or AML require techniques that can analyse and process huge volumes of transactions, whereas something like Claims fraud or Application Fraud won't have this requirement and other factors can be more relevant. However, there is little doubt that Financial Services and Telco have actively sought AI technologies while others have been more fearful of so-called 'black box' approaches. 

How are Big Data and Data Science tools, such as Hadoop, helping combat Fraud effectively? 

There’s no question from an analytics perspective that Python and R are the two languages that Data Scientists are using. But it helps to have specialists in technical skills, such as DevOps and DataOps, to provide the technical expertise that allows them to build models and utilise Data most effectively. 

As for Hadoop, it makes sense for Data Scientists to have an understanding, but ultimately I see that skillset as one belonging to the technical specialists. This is why I firmly believe that every Data Science team should have a supporting tech function.  

What are the latest technologies helping combat Fraud? 

From an analytical perspective there has been a recent focus on graph analytics and network analytics as these can be applied to external Data. These approaches have been around for a while however and are limited to certain types of Fraud. We’re also seeing more unsupervised techniques being used as these do not rely on prior fraud case data so can be applied to a wider set of cases. 

Another new area has been adaptivity. This is a model that adapts over time depending on operational feedback from the analysts. Again this is not new but you really need to balance the impact of this new information compared to how the model is currently working and so is very challenging. As long as you can maintain a sufficient degree of explainability you can ensure the process is sufficiently well governed. 

There has been a significant move to cloud-based technologies where companies can reduce their implementation and maintenance costs. We are just about to release our new Falcon X platform, which is a cloud-based fraud platform, that will allow clients to use all the FICO capabilities but also allow them to develop their own analytics as well. 

I think potentially the biggest change will be the progressive adoption of biometric authentication. SCA is a requirement for all high-value transactions in PSD2 and this requires two-factor authentication from inherence, ownership and knowledge: so something you are, something you have or something you know. I think biometrics will start to play a big role in authentication and, hopefully, will provide much greater identity security. 

Another trend I think we may see is the growth of digital IDs. There is already a well-advanced program in the Nordics called BankID and the concept of a digital ID seems inevitable at some point. 

Derek spoke to Senior Consultant, Rosalind Madge. Get in touch with Rosalind or take a look at our latest job opportunities here.

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Risk Analytics & Your Job Search

Risk Analysis is a daily part of our decision-making process. Its influences are felt in how we prioritise projects. Hello, project management. It determines when we take breaks. And in the working from home or remote working culture, lines between personal and professional life are soon blurred. Our decision-making ratchets through microanalyses of next steps, words to use, when to log off the computer, and what time to make lunch or dinner. Almost without realising it, we're using the SWOT matrix determine risk. That's just in our personal day-to-day lives. Organisations have been using these strategic planning techniques as a daily part of their enterprise lives. So, imagine this. You determine your strengths, weaknesses, opportunities, and threats (SWOT) to write your CV, land the interview, and get the job. Aren't you already on your way to helping your company determine their risk on a bigger scale?  Isn't Risk Analysis the Same as SWOT? Not exactly. While you are identifying, measuring, and analysing issues, the idea is to avoid or lessen risk. In the movie War Games, the main character decides he's going to play a game. But, neither the computer nor the main character understands the game is not a game. They have no idea what risk they've unleashed as keystrokes begin to lead to war.  Militaries use Risk Analysis regularly to determine if war should begin, estimated casualties and cost just for a start. But, in the end, it's usually decided peace keeps the world away from war after all the risk has been analysed. Though most businesses and individuals don't have the risk of war at their doorstep, there are extenuating circumstances which must be determined to avoid risk. This can be anything from natural disasters to legislation to physical requirements and locations. The SWOT technique is a tool within strategic planning as are Risk Analytics. Let's take a look at the benefits of Risk Analysis.  It can help your business improve security, manage costs, and plan for any surprises. Whether it helps you in your job search or manage your business once you're hired, a combination of SWOT and Risk Analytics can help your decision-making process shine. Done well, Risk Analysis is an important tool for managing costs associated with risks, as well as for aiding an organisation's decision-making process. SWOT your way to a Successful Job Search So, first, let's take a look at what SWOT is and isn't. This type of analysis is a tool most often found in strategic planning for organisations. But, it's not the only tool when assessing risk. Like any data profession, you'll want to gather, collect, and analyse the information before you. And when it comes to the job search, knowing yourself and your self-awareness levels may play a bigger part than you imagine. Skipping ahead to the interview from your 'foot in the door' CV and cover letter both delivered via video, of course, you begin to plan for your interview. "What are your biggest strengths and weaknesses?" your hiring manager asks. You've come well-prepared for this question because you've done your SWOT analysis. From the moment you decided your areas of expertise, your roles in organisations, and any areas you know you need to improve but can turn into a positive. You've pre-assessed your strengths, weaknesses, opportunities or obstacles, and threats. Strengths – What characteristics do you possess which gives you an advantage over your competition? Have you cross-trained across a variety of departments? Do you have a knack for telling a compelling data narrative story to help make leadership make an informed decision? Weaknesses – Where could you use more training? Are you looking for a business that offers it in-house or do you need a certification or class to give you a leg up over your competition? What puts you at a disadvantage and how would find a work around? What can you do to improve? Opportunities or Obstacles – Has your experience taught you a new way of doing things within the industry? Does your experience extend from working alone to strong member of a team? Was the team in-house or scattered around the world? How did it affect your working style and what did you learn from it? Threats – Threats may seem at odds with a job search, but…that was then. This is now. Threats are simply external forces which cause trouble in your planning. In other words, this is your risk assessment. What risks are involved and of those risks which will have less effect and which will have more on your desired outcome? Performing this technique in your personal and professional life helps you peel back the layers of you. What has your education prepared you for? Your work experience? The projects you've chosen or been assigned to? It's all leading somewhere, right? This is where you match your strengths to opportunities. Hello, dream job. If you're looking for your next role in the Data & Analytics, we may have a job for you. Take a look at our current opportunities or get in touch with one of our expert consultants to learn more.  

Why Businesses Need To Put Fraud Prevention Front And Centre

If Fraudsters are anything, they are opportunists. Once the first new stories about COVID-19 started running, it wasn’t long until they were joined by tales of fraudsters selling face masks and hand sanitiser, asking panicked customers to transfer money and then disappearing without a trace.  And it’s not the first time we’ve seen this. Fraudsters are notoriously wise to periods of heightened sensitivity and uncertainty, often preying on the vulnerable. The 2008 financial crisis saw an increase in email-based phishing scams and a decade’s worth of technological advancements means that Fraud remains a many-headed beast.  Add into the mix a change in working styles and environments, and many businesses are more exposed to potential security breaches than they have been in years. Now, more than ever, companies need to make sure their Data is well protected and secure. THE FIRST LINE OF DEFENCE If you’re part of, or leading, a Fraud Prevention team, there are a number of ways you can support your business and keep on top of the situation. Here are just a few: Increase and update your investigation capacity. This team are the front line of your business’ Fraud defence team, interacting with customers daily and spotting new scams. During an uncertain period, retention and team stability is key. These are the people that understand the day-to-day Fraud challenges you face and will be essential in fighting any future challenges.  Sharing Fraud Prevention knowledge is key. Throughout this crisis, trends will be evolving quickly and working collaboratively across teams, and even other businesses, is the best way to combat this. We consistently hear from Fraud Managers that the key to beating Fraud is to share information and knowledge. Despite this, there is always a hesitation amongst companies to admit that they have been a victim to an attack. Perhaps now is the time to change this. Invest in Machine Learning and real time updates for your Fraud defences. Fraud technology has moved on from script writing in SQL and rule changes. Businesses need a real time reactive response and now is an important time to be embracing new technologies. There are a number AI-driven off the shelf packages available or, for a more bespoke solution, a Fraud Data Scientist can create something internally. Educate your team. It may seem simple, but the Fraud team can play a crucial role in minimising any potential risk from human-error. Educating employees on the risks they may face when working remotely, or what scams they need to look out for, is one of the most effective ways of fighting Fraud.  PREPARING YOUR BUSINESS Success in the fight against Fraud isn’t purely down to the group of individuals that make up the Fraud team. As a business, now is the time to be making decisions that can help you stay ahead of the Fraudsters. Here are some considerations: Consider investing in tech as an your immediate response. Not just to bolster your Fraud defences (although there are plenty of vendors offering AI-based solutions), but also technology for your employees to keep work as normal as possible such a sharing platforms, DevOps technology and video calling networks. One of the best ways to block some of the vulnerability loopholes fraudsters are trying to exploit is to keep working habits as close to normal as possible as you move to a remote solution. Be transparent with your customers. Consumers are being incredibly savvy and noting how businesses respond to the pandemic in a way that could have a big impact when normality returns. But they’re also being more empathetic and are willing to understand difficulties. For example, shopping delivery service Ocado were open and transparent when their system could not initially deal with demand. Having communicated the difficulties, worked through their issues and gone the extra mile to let customers know how they can be supported in this time, the received minimal backlash. There is an understanding that we’re all in this together. Finally, if you have the budget, continue to staff up - particularly in competitive fields such as Data Science. A lot of top Data professionals are currently at home and much more accessible than they have been in a long time. With a number of ways to remotely interview and onboard both permanent and contract staff, if you are able to get begin conversations with them now, you’ll have an edge in what will be a very competitive market come later in the year.  If you’re looking to take your next step in the world of Fraud, we may have a role for you, including a number of remote opportunities.  Or, if you’re looking to expand and build out your Fraud team, get in touch with one of expert consultants who will be able to advise on the best remote and long-term processes. 

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