How AI Can Help Detect And Prevent Debit Card Fraud

Last year alone, 2022, losses associated with card fraud hit a record $34.4 billion. But while this number is astonishingly high, it’s only growing worse. Over the next 10 years, card industry losses to fraud (including credit card fraud and debit card fraud) will collectively amount to an estimated $408.5 billion.

Unfortunately, financial institutions will bear the majority of these losses, and for some, the volume and cost of card fraud may become too overwhelming to continue operations.

When debit card fraud occurs, it is damaging to both legitimate account holders, their financial institutions, and retailers. Not only do risk and fraud teams have to go through an extensive process of investigating, stopping, and halting further illicit transactions, but the institution’s reputation with their customers or members is often seriously damaged as a result. Further, institutions must reimburse their clients or members for any funds stolen.

ToolCASE knows how dangerous debit card fraud is for both the institution and the customer/member. That’s why we’ve developed a cutting edge, real-time fraud detection and prevention system using the world’s most advanced artificial intelligence technology, or AI.

What is Debit Card Fraud?

Debit card fraud occurs when someone uses another person’s debit card to purchase goods and services without their consent or knowledge; or clones a card or its data to commit crimes. Debit card fraud happens predominantly in e-commerce marketplaces where payment is rendered through electronic banking transactions.

Still, it can also occur when a fraudster manages to steal deposited funds directly from a victim’s account, even at ATMs. Real cash exists in accounts and can be withdrawn or transferred quickly, and absconded with. This leaves the institution on the hook for its customer/member losses.

Which Businesses and Institutions Suffer the Most From Debit Card Fraud?

Predominantly, debit card fraud occurs in online marketplaces or via electronic purchases. Businesses that ordinarily use electronic payments or transfers include:

Restaurants: Restaurants, especially delivery-based restaurants, or food delivery services, regularly suffer from debit card fraud. Debit card fraud detection can be difficult when orders are taken online or over the phone, as there is no guarantee that the person placing the order is the owner of the debit card or its associated account. Like credit card fraud, card not present (CNP) fraud with debit cards is on the rise in the food services industry.

Banking: UnfortunatelyBanks and Credit Unions have seen an uptick in accounts being hacked using stolen PII. These hacks often result in new debit cards being issued to fraudsters using the stolen PII.  It doesn’t take too much effort for the criminals to succeed. Many banks and credit unions, unfortunately, do not have a sufficiently sophisticated debit card fraud detection system to protect their customers or members, in real time.

Most bank fraud detection systems analyze “batches” of post-transactional data to inform an institution’s risk and fraud teams that fraudulent transactions may have occurred. However, since these frauds are detected in post-transactional batched data, the fraud has already happened – leaving customer or member accounts emptied, and financial institutions responsible for covering the losses.

Online Marketplaces: At nearly every online retail business payments portal, debit card fraud may occur. It is not a matter of if, but when. eCommerce businesses that lack sufficient fraud detection software, are highly vulnerable to attacks. Their customer trust and brand loyalty can be negatively affected when debit card fraud occurs. After all, if you cannot protect your own customers from fraudulent transactions and safeguard your business, why would consumers continue to trust you?

Fraud Detection Using AI

Fraud detection software has come a long way. Still, most systems and tools are outdated for the ever-changing and advanced technology that fraudsters and criminal organizations use to perpetrate debit card fraud. With such massive volumes of card frauds occurring, and further increases forecast, it’s difficult to assign one person to watch for fraud around the clock. Even a fully staffed risk and fraud team has its limitations.

This is why many institutions are switching to ToolCASE. Our real-time fraud detection using AI is completely changing the global transactional marketplace, while helping to protect large and small institutions from the financial and social damages of debit card fraud, as well as other transactional banking frauds.

How AI Changes the Game

Fraud detection software that uses AI operates all hours of the day, analyzing a near unlimited number of data sources, live. A team of fraud experts can monitor the system manually or it can be automated to function while they are off duty or unavailable to monitor. Unlike traditional fraud detection software, fraud detection using AI is done in real-time: precisely countering and combating debit card fraud as it’s happening; not simply “discovering” it after the fact in batched data analysis.

Fraud detection using AI must soon become the norm for most businesses, especially banks and credit unions who incur a majority of the losses. As stated earlier, total cumulative losses due to card frauds will likely surpass $408 billion over the next decade. This year alone, those losses are expected to reach a new record high of $36.1 billion.

While many banks and credit unions – especially those who utilize out-of-date legacy fraud detection systems – will be on the hook for massive losses, those institutions with the foresight to incorporate state of the art, real-time card fraud detection and prevention systems powered by artificial intelligence could potentially experience a significant DROP in fraud costs.

You don’t have to allow your institution to continue to be a victim of debit card fraud. To help ensure your financial security through real-time fraud detection software, contact us here at ToolCASE.

Discover how real-time Ai can potentially eliminate many of the transactional frauds you’re experiencing at your institution, before it’s too late.