Fraud Analytics

Fraud Analytics & Insights: Overview

Fraud is any illegal activities to gain financial benefit or monetary value. Fraud can include incorrect representation of information for financial gain such as in case of “claims for insurance”,stealing and using information illegally for financial gain as in case of stealing others credit card information, and abusing its position for illegally approving transactions or transferring money .

Fraudulent activities can be classified based on different categories. One of the classifications is based on type of functional areas.

Credit Card Fraud:

Stealing credit card information and using cards data for illegal transactions.

Insurance fraud:

Insurance fraud can help at the time of taking insurance by provide fake documents to get better premium rate and also at the time of claim reimbursement by producing incorrect or fake documentation to get the claim on insurance policies. Fraud can happen across insurance policy types such as motor insurance, health insurance etc.

Some of the detailed types of credit card frauds are:-


Card Not Present (CNP):

A credit card can be used over internet (need only information about a physical card) and Point of Sale (POS) machine (physical card is required). Fraudulent transactions which happen over the internet are called Card Not Present (CNP) fraud transactions. Merchants typically asked for CVC code written in the back of credit for verification over the net. Added security leveraged by some of the credit card issues is authorization of transactions using secured PIN.

Lost and Stolen:

Cards can be lost by a customer or stolen from the customers for illegal use of the credit card for making transactions. The customers or card holder should inform the card issuer as soon as possible, so that card issuer can block the card before someone misuses the card.

Counterfeit Credit Cards:

Some of the credit cards have a magnetic, which stores information about the customer and card account. Using “skimming” technology, fraudsters steal the card data and create a duplicate credit card for fraudulent activities. To manage this type of fraud, a Chip & Pin embedded credit card has been used.

Non –Receipt (Intercept) Fraud:

When a customer applies for credit card after required approvals and checks, the card issuer courier or posts the card to the customer. In some countries the customer can a reactivated credit and in other countries the customer has to call back with details to get the card activated before using the card. A similar process is followed for a card replacement scenario. When a card mailed is lost on a transit and used for fraudulent activities, it is termed as Non-Receipt Fraud.

Identity Theft Fraud:

Identity Theft is stealing enough personal information about a person to use in fraudulent activities on behalf on the person. The fraudster steals personal information using various means such as finding information from discarded papers & documents or by standing next to the person (shoulder surfing). The fraudster can make use of the information for opening an account or applying a credit card and using for financial gain, and can take over the financial accounts.

In a credit card, typically there are two broader categories of frauds Analytics- Application level fraud and Transaction level fraud.

Commonly used analytics themes in Fraud Analytics are:-

  • Segmentation
  • Application Fraud Modeling
  • Anomaly Detection and Modeling
  • Fraud Rule and Trigger Development and Tracking
  • Fraud Loss forecasting
  • Strategic analysis