The Future of AI in Financial Services: Transforming Fraud Prevention and Security

Title: AI and ML Revolutionizing Fraud Prevention in Financial Institutions

In a recent interview with PYMNTS, experts and innovators in the artificial intelligence (AI) field shared their insights on how AI will transform the payments and commerce sectors in the years ahead. One key area where AI is making a significant impact is in improving efficiencies in financial services, particularly in the fight against financial crimes such as money laundering and fraud.

Akli Adjaoute, founder and general partner at venture capital fund Exponion, highlighted the benefits of using AI in anti-money laundering (AML) and fraud prevention efforts. As confirmed by PYMNTS Intelligence’s data, AI is already proving to be a valuable tool for financial institutions (FIs) looking to combat illicit activities.

The report, “Financial Institutions Revamping Technologies to Fight Financial Crimes,” created in collaboration with Hawk AI, revealed that more than 40% of FIs are experiencing an increase in fraud incidents. To address this challenge, 7 in 10 FIs are now leveraging AI and machine learning (ML) to fend off fraudsters.

While FIs use a combination of in-house fraud prevention systems, third-party resources, and new technologies to protect their institutions and customers, AI and ML technologies are gaining ground. Seventy-one percent of FIs are now using both AI and ML in their fraud-fighting efforts, up from 66% in the previous year.

Despite the effectiveness of AI and ML in combating fraud, developing these tools can be costly. Only 14% of FIs build their own fraud-fighting AI and ML technologies, with nearly 30% relying entirely on third-party vendors for these solutions. This trend of integrating third-party technologies into fraud-fighting efforts is expected to continue in the future.

The key takeaway from the report is that AI and ML are increasingly becoming the preferred tools for industry executives seeking effective fraud prevention solutions. Third-party fraud prevention vendors that can demonstrate a track record of successfully developing AI and ML-powered tools will likely stand out in the market.

As financial institutions continue to revamp their technologies to fight financial crimes, the role of AI and ML in enhancing fraud prevention efforts will only become more prominent. With the ongoing trend of integrating third-party solutions, the future of fraud prevention in FIs is undoubtedly AI-driven.