With the arrival of challenger banks and nonbanks, the online banking industry has seen a radical transformation in the last few years. But this also opened the door to more fraud attacks. 

This article will detail where the risks lie, and which banking fraud detection software will improve your financial institution’s security.

The 6 Best-Rated Banking Fraud Detection Softwares:

• SEON – Transparent, Modular, Powerful
• SAS – The Analytics Legacy Leader
• ThreatMetrix – On-Premise or Cloud-Based FI Risk Management
• Featurespace – Real-Time Authorizations for Payment Platforms
• Feedzai – AI Against Financial Crime
• Experian Hunter – Application Fraud Detection

What Are the Most Common Types of Fraud in Banking?

The greatest risk for banks, neobanks, and financial institutions is onboarding users who are not who they say they are. Fraudsters use stolen IDs and synthetic IDs to create accounts. This creates compliance issues (KYC and AML), which can have dramatic consequences in the long run. 

Once fraudsters and criminals have created their accounts, they will commit loan fraud, launder money, and use the account as a “drop” to receive payment from nefarious activities. 

Existing banking customers are also at risk of account takeover attacks (ATOs), where fraudsters acquire their login credentials and drain the account. 

It’s worth noting that banking fraud attacks are increasingly targeted at neobanks and challenger banks, who pride themselves on offering a frictionless customer experience. The easier it is to onboard and sign in, the higher the risk of fraudulent attacks.

What Can Banking Fraud Detection Software Do? 

There are three key goals of banking fraud detection software:

• Confirm a person’s identity: The onboarding process should only go through once you are certain that the person is real, and valuable for the financial institution.
  
• Ensure compliance: Because the financial world is so heavily regulated, banking fraud detection software should help meet all regulatory requirements pertaining to PSD2 and SCA (strong customer authentication), CDD (customer due diligence), KYC (know your customer), and AML (anti-money laundering). Failing to perform the right AML checks is becoming increasingly dangerous and expensive as new laws and regulations are put in place.
  
• Protect customer accounts: Once customers have set up their accounts, it’s the bank’s job to ensure nobody else accesses them. Banking fraud detection software should therefore work both as an identification solution and as an authentication tool as well as flag suspicious transactions to spot a potential scam.

Roughly speaking, all three processes are performed by logging data, monitoring it, and investigating anomalies. Anomaly detection works by establishing a ground truth and looking for patterns (predictive analytics). 

How risk managers deal with these patterns, however, varies depending on the kind of banking fraud detection software at their disposal. 

Different Types of Banking Fraud Detection Software

Banking fraud detection software comes in many shapes and forms. Here are the key types you should consider before deploying yours:

• In-house vs outsourced: Is it worth keeping the software on-premise? Or should you outsource it to a third-party, cloud-based vendor?
• Mature provider vs startup: The strategic maturity of a provider is worth considering depending on various factors such as ease of integration with modern platforms, ability to prove ROI based on historical results, length and price of the contract, etc.
• Static vs customizable transaction monitoring: While it’s important to monitor transactions, it should also be adjusted based on the institution’s risk appetite. This is only possible with fully customizable settings. 
• Whitebox vs blackbox machine learning: Machine learning is an increasingly popular solution for discovering banking risk. However, not all algorithms are transparent about how they spot patterns. While some banking clients will prefer blackbox models that just work without tweaks, others will favor the extra control of a whitebox system – which should come with human-readable rules and explanations.
• Heavy friction vs lightweight user experience: A particular challenge for neobanks, who stake their reputation on offering an easy and intuitive user experience. How do you reduce risk without adding too many obstacles for your customers? 

The 6 Best Banking Fraud Detection Software

Disclaimer: Everything written about the companies mentioned in this article was gleaned from online research, including user reviews. We did not have time to manually test all the tools. However, we ensured the information was correct as of October 2021. Feel free to contact us to request an update/correction.

SEON – Transparent, Modular, Powerful

SEON leverages the power of alternative data to help financial institutions, neobanks, and challenger banks complete the picture about who their customers are. The end-to-end platform lets you leverage data enrichment to learn as much as possible, based on the minimum information to pass KYC and AML requirements.

You’ll benefit from analysis tools that extract data from a single email address, phone number, and IP address. You can also learn a ton about who you’re dealing with based on their social media presence, and configuration of software and hardware via device fingerprinting.

All that data is fed through customizable risk rules, which can also be suggested via a whitebox machine learning algorithm. The key here is that SEON gives banking risk managers an extra layer of data to gain full confidence in accepting or rejecting risky customers, which has a knock-on effect on fraud rates down the line.

SEON is one of the rare fraud detection tools to offer transparent pricing and a free trial, so you can immediately see how its features can help your neobank, challenger bank, or FI with existing clients including Raiffeisen Bank, Illimity and Nubank.

SEON Pros

• Alternative digital footprint analysis: SEON’s data enrichment methods make it ideal for markets where standard financial information is scarce.
• Reverse social media lookup: SEON scans 35+ social networks for customer data, allowing you to gain a precise picture of who you’re dealing with online.
• Modular, flexible integration: Modern banking companies can pick and choose the modules they need to complement their risk management strategy – or build an entirely new risk stack from scratch.
• Spot connections between accounts: Some ID verification and validation tools only point out suspicious profiles. With SEON you can also spot hidden connections to take out fraud rings. Especially useful for neobanks who are growing via bonus and referral programs.
• Transparent pricing: In true SaaS fashion, SEON lets you pay per API call and cancel your contract at any time.

SEON Cons

• No on-premise installation: While you have plenty of options on how to integrate SEON, it is only available as a third-party solution – exceptions are made if you only need the device fingerprinting module as an extra layer and request onsite installation.
• Not ideal for AML: SEON can help verify identities, but you won’t be able to check PEP or exclusion lists.

SEON Pricing

• Starts at 99€ per month.

Choose SEON If

• You are a neobank or challenger bank that favors low friction for new account opening, without sacrificing peace of mind when it comes to mitigating risk.

SAS – The Analytics Legacy Leader

If you’ve worked in risk management (or any company that uses analytics) in the last ten to twenty years, chances are you’ve heard about SAS. 

The analytics leader is used by more than 82,000 businesses in 145 countries and employs close to 13,000 employees worldwide. In fact, 91 of the top 100 Fortune 500 companies are SAS customers in one way or another.

So what does SAS do for banking fraud prevention exactly? Their framework is designed for anomaly detection to reduce risk and to consolidate your views of potential fraud. It is widely used in the BFSI sector (banking, financial services, and insurance), as it enables enterprise-wide monitoring from a single platform. 

The features of its fraud detection platform include real-time transaction scoring and decisioning, blackbox machine learning, and alert management, all based on seamless integration of all your data, regardless of source or type. 

While it was once the go-to platform for banking fraud detection, it seems to be increasingly replaced by – or at least augmented with – newer, more nimble anti-fraud software.

SAS Pros

• Trustworthy name in BFSI: SAS used to be the go-to for banking fraud detection.
• Powerful analytics: The company is first and foremost an analytics company, so you can trust its prediction models. 
• Documentation and tech support: Users report being extremely satisfied with the help they receive after implementing SAS.

SAS Cons

• Outdated UX: SAS shows its age when it comes to the dashboard and user experience. 
• Expensive: See below.

SAS Pricing

• Available upon request. However, online sources report prices from $9K to $64K per year, depending on the package you need.

Choose SAS If

• You are a retail or traditional banking institution with an enterprise budget and strong compliance requirements.

ThreatMetrix – On-Premise or Cloud-Based FI Risk Management

Acquired in 2018 by the multinational analytics company LexisNexis Risk Solutions, ThreatMetrix is quickly becoming a fraud prevention leader for financial services, insurance, as well as pension companies and nonprofits. It currently helps more than 5,000 brands verify identities thanks to its 78 billion data records.

If you already use other LexisNexis products, the integration with ThreatMetrix should be seamless (albeit not free). A good example would be the missing data enrichment feature, which you can purchase through Emailage. 

In terms of risk rules, however, ThreatMetrix offers anything you may need, from behavior tracking to custom rules and machine learning suggestions – all available via API calls or on-premise installation.

ThreatMetrix Pros

• Large IP database: ThreatMetrix has one of the largest databases of blacklisted IP addresses.
• Graph visualization: Risk managers can explore connections between account holders’ details with a data visualization tool.
• On-premise deployment: Financial institutions who need to keep their tools locally can integrate ThreatMetrix on-premise.

ThreatMetrix Cons

• Opaque pricing: As is often the case in the world of banking fraud prevention software, you’ll have to jump through sales demo hoops before you can get a quote.
• Data enrichment as extra: You’ll need to purchase extra LexisNexis products, such as Emailage, to aggregate external user data.

ThreatMetrix Pricing

• Available upon request. 

Choose ThreatMetrix If

• You want machine learning rules and on-premise installation as well as graph visualization for risk management.

Featurespace – Real-Time Authorizations for Payment Platforms

The risk management and fraud detection for HSBC, Clear Bank, and Danske Bank, among others, Featurespace is dedicated to fighting financial crime in any way, shape, or form. 

Created by Cambridge University Professor Bill Fitzgerald in 2008, the company started making waves in the banking world thanks to its Adaptive Behavioral Analytics engine (the ARIC Risk HUB). 

Built for enterprise financial institutions, the company’s machine learning system is designed to be deployed on-premise or cloud-hosted. The goal? To predict individual behavior in real-time, with a specific focus on improving AML compliance.

Featurespace Pros

• Supporting banking leaders: Financial institutions will be in good company, as Featurespace supports global leaders such as HSBC and Danske Bank, among others.
• Merchant acquiring fraud prevention: Featurespace has specific rules to help with exception management and transaction laundering, and improve merchant identity validation.
• On-premise deployment: You can install Featurespace on-site. 

Featurespace Cons

• No data enrichment modules: As it is an end-to-end solution, you can’t pick and choose what you want to use from Featurespace.
  
• High minimum requirements: Like many solutions targeting top-tier banks, Featurespace tends to offer lengthy, expensive multi-year contracts.

Featurespace Pricing

• Available upon request. 

Choose Featurespace If

• You are a tier 1 financial institution that needs on-premise integration – especially for AML requirements.

Feedzai – AI Against Financial Crime

Trusted by banks such as Citi, Lloyds, and Santander, Feedzai is dedicated to protecting financial institutions in three ways: securing account openings, controlling transaction fraud, and stopping money laundering.

At the time of writing, the US-based fraud detection company protects a whopping 45% of the UK’s banking population and 55% of Canada’s. 

Feedzai relies heavily on its open machine learning algorithms to mitigate complex financial crime, with native support for your own data science tools. The company claims it allows risk managers to create “hypergranular profiles” for cards, terminals, devices, or IPs.  

Last but not least, Feedzai’s AI system is even integrated into its case manager tool (to dispute financial crime cases) and its Genome tool, to visualize connections between accounts and attack vectors. 

Feedzai Pros

• Anti-fraud and compliance: The AML product suite allows you to screen for sanctions PEP lists and to monitor suspicious transactions. 
• Financial institution specialists: Feedzai has positioned itself as the risk management solution for numerous retail, issuing, and acquiring banks.

Feedzai Cons

• Overwhelming features: Feedzai is powerful and complex, which may come at the expense of an easier learning curve for risk managers.
• Pricey: Feedzai has an opaque pricing structure, but it’s understood to be at the higher end of the spectrum, targeting tier 1 retail banks and FIs.

Feedzai Pricing

• Unavailable online.

Choose Feedzai If

• You are a medium to large financial institution with an interest in leveraging complex machine learning and AI for your risk strategy.

Experian Hunter – Application Fraud Detection

As a renowned UK credit scoring company, it makes complete sense for Experian to leverage its databases to offer identity verification services. It is exactly what its Hunter software does, with a focus on preventing application fraud in the banking world. 

As Experian rightly puts it, the first and best strategy to reduce fraud losses is to identify criminals at the point of application. Their detection method is designed to be highly configurable, whether you’re a traditional retail bank or a challenger bank with low-friction needs. 

And, of course, the key bonus is that you can integrate the application screening solution with other Experian products, such as the company’s renowned credit scoring tools.

Experian Hunter Pros

• Trustworthy name in BFSI: Experian is known for credit reports, and it’s a brand name anyone in the industry will be familiar with.
• Integrates with other Experian tools: You can link Hunter with CrossCore, for instance, the company’s behavioral biometrics solution – or its credit scoring tools, of course.
• Huge shared data lists: Hunter’s data sharing is based on Experian’s years of aggregating financial information.

Experian Hunter Cons

• Overwhelming number of products: Hunter is just one of the many products and services offered by Experian. The segmentation can sometimes be confusing, and you may need to investigate further before being 100% sure you’re selecting the right tool.
• Opaque pricing: See below.

Experian Hunter Pricing

• As with all other B2B Experian products, you’ll need to speak to a sales team to book a demo before you can get an idea of your quote. 

Choose Experian If

• You want to offer loans and link an application monitoring solution to Experian’s credit scoring tools.

Choosing the Right Banking Fraud Detection Software

Fraud prevention software is never easy to select. This is doubly true in the banking vertical, where you must take into account compliance, the quality of your data, and the efficiency of the tools at your disposal – which are often unavailable to try before you buy.

Hopefully, this primer on the six best-rated banking fraud detection software will give you a better idea of where to look, what kind of features will work for you, and whether your choice can help protect your financial institution, challenger bank, or neobank in the long run. 

Banking Fraud Detection FAQs