4 Ways to Use Unit21 for Fraud Detection

November 3, 2022

Digital financial services know all too well the impact fraud has on their business. With an average fraud rate of 0.30%, these virtual counterparts to traditional banks face double the fraud rate of credit cards (at 0.15% to 0.20%) and triple that of debit cards (at 0.10%). While that may seem like a small sum, these amounts add up quickly; in the United States, fraud losses amounted to $56 billion from just identity fraud.

Without proper fraud detection in place, companies will never be able to adequately prevent or protect against fraud. The more fraud that goes undetected, the more it will impact the business - leaving companies without a way of intervening.

To make sure no fraud squeaks through the cracks, we’ll cover some of the main reasons a fraud detection solution is essential for actually keeping Fintechs free of fraud.

Let’s dive into the top reasons to use Unit21 to optimize fraud detection efforts.

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4 Top Fraud Detection Use Cases for Unit21

Adequately preventing and protecting against fraud requires Risk & Compliance teams to detect fraud accurately. Below, we dive into four of the top ways that Unit21 can be used to help with fraud detection - and subsequently - fraud prevention and protection.

1. Provide a Secure Account Opening Experience (with Additional Account Takeover Controls)

The best way to protect against fraud is to prevent fraudsters from accessing the platform in the first place.

Many fraudsters are more likely to perform fraud immediately after onboarding, and then abandon their account. It’s much less common for fraudsters to develop accounts, get them in good standing, and then perform fraud. Because of this, ACH fraud is extremely prominent; fraudsters initiate deposits into their accounts, make purchases or trades using the advanced funds, and then repatriate or reverse deposits. This leads to fraud losses for the company, and these losses can be substantial; Robinhood experienced a rise in credit losses to 54% (and a total value of $37 million) in a single quarter.

Let's look at visualization of how this process works:

ACH Fraud process explained.

With proper identity verification and KYC/KYB processes, companies can ensure that the users they onboard are who they say they are. Users get a seamless onboarding experience that is safe and secure.

Unit21 doesn’t stop there though; it can also be used to monitor if bad actors are attempting to take over those new user accounts. This really helps protect customers - and the platform - from fraudsters.

As a burgeoning field, Fintech initially focused on growth at all costs, often putting Risk and Compliance operations on the back burner. This is especially true at the onboarding stage, as restricting new users from signing up can really limit business growth. While businesses don’t want to bog new users down with identity verification and authentication, it’s essential for keeping the platform free of fraudsters.

Digital banking as a whole is facing larger fraud rates, causing businesses (and in some cases, entire service industries) to avoid, limit, or bar partnerships with digital payment platforms. This puts Fintechs in a position where they must perform more adept screening, case management, and compliance functions to ensure security, and maintain relationships with merchants.

2. Create Sophisticated Rules That Examine Existing Customer Behavior

Preventing fraudsters from joining the platform in the first place is a good first practice, but fraud prevention efforts shouldn’t end there. It’s important to continuously monitor customer behavior to identify fraudulent transactions and accounts.

This is especially important regarding ACH fraud, as the ACH network lacks real-time verification. Neobanks and other Fintechs that are trying to offer frictionless, immediate service take on risk when releasing funds that haven’t been verified via the ACH. 

It becomes a balancing act between protecting against risk and offering customers the user experience they demand. Responsible for verifying $62 trillion worth of transactions in 2020, it’s a real challenge to ensure adequate protection without using this verification step. That’s where sophisticated, customizable transaction monitoring comes in!

Unit21’s flexible, customizable rules engine enables Risk & Compliance teams to find anomalies in users’ regular behavior. We even have pre-built rules that are ready out-of-the-box, so businesses can get up and running quickly. Our no-code solution is designed to be simple to work with, while still enabling anti-fraud teams to create sophisticated rules that protect customers.

With true data monitoring, businesses don’t just get info on customer behavior at a specific point in time, but can monitor behavior and detect anomalies that would otherwise go undetected.

3. Protect the Platform and its Ecosystem from Bad Actors

Properly protecting against fraud isn’t just about protecting customers but also about protecting the company from bad actors from working on their ecosystem. It’s critical to maintain a safe, secure environment for users, and that starts by keeping the platform itself protected.

With Unit21, companies can monitor individuals and entities interacting on their platform, gaining details about their behavior. This allows Risk & Compliance teams to easily identify suspicious and abnormal behavior from customers, and root out fraud. This allows organizations to defend against friendly fraud and account takeover fraud.

Companies can leverage link analysis to understand the extent of their fraud problem, uncovering fraud networks. This significantly cuts downs on fraud detection efforts, as a single incident of fraud can uncover other participants. This lets teams understand if they are dealing with a single bad actor, or a network of 10, 20, 50, or more that are all working together.

4. Fraud Prevention for Crypto Platforms and Exchanges

Unit21 is an ideal solution for businesses looking to get a holistic view of currency being transferred from fiat to crypto (and potentially back again). Teams can write rules that let them directly monitor everything happening on the blockchain. Specifically, Unit21 can be used at a critical point in this process - when crypto is being converted back into fiat currency. With proper monitoring, it can determine if the activity in the ecosystem makes sense business-wise, or if it is potentially being used as a tool to launder money.

Create specific rules to monitor transactions and track the movement of money. Get a good idea of how the full cycle works within the product ecosystem, showing fiat being exchanged to crypto and crypto back to fiat. This allows Risk & Compliance teams to detect and prevent cryptocurrency fraud on platforms, exchanges, and more.

Download Transaction Monitoring Product Guide

Don’t Let Any Fraud Go Undetected with Unit21

To adequately prevent and protect against fraud, companies need to be able to detect fraud in the first place. This will also allow companies to reduce false positives in fraud prevention efforts.

Unit21 specializes in both fraud and AML compliance, offering a complete FRAML solution to ensure you manage risk and mitigate fraud. To see how we can help you catch - and stop - fraud, schedule a demo today.

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