Nationwide detects and prevents fraudulent activity with advanced analytics

Nationwide detects and prevents fraudulent activity with advanced analytics

Avoiding Scams

We all like to think we’re too smart to be deceived by fraudsters. But what if a trustworthy representative from your bank calls to warn you that you’re susceptible to a new kind of fraud? And they say transferring your money into a new type of account would keep it safe.

This type of call is actually a scam. In recent years, banks and building societies have witnessed the rise of authorised push payment (APP) fraud: a scam whereby criminals dupe people into sending large sums of money to false accounts, often playing on their fears of being deceived to con them.

“APP fraud takes many forms,” says David Parsons, Product Owner – Tactical Fraud Initiative at Nationwide. “A typical example would involve a criminal calling or emailing their victim and pretending to be from their bank. Often, fraudsters tell their victims that their bank account has been compromised and that they must transfer funds to a ‘safe’ account, which will actually be controlled by the criminal.”

Unlike credit cards, which enable consumers to reclaim money stolen by fraudsters, authorised bank transfers are not protected. As a result, funds lost to APP fraud are rarely recovered.

To protect consumers, regulators in the UK have recently launched a new voluntary code for payment service providers that assures full reimbursement for victims of APP fraud. Preparing for the implementation of this code has motivated payment service providers like Nationwide to sharpen their capacity to detect criminal activity.

“Detecting APP fraud is especially complex, as funds transferred in these scams often look like normal transactions,” Parsons says. “To identify fraudulent payments, we build profiles of our members’ typical account activity, so that we can flag up any anomalies in their spending patterns that could be the result of fraud. While this method is effective, it can have negative consequences on our members’ banking experience if we don’t honour a genuine transaction that our systems have identified as potentially dubious.”

Committed to protecting its members’ accounts, Nationwide set out to refine its fraud prevention activities and reduce false positives in detecting results that could also upset members.

Analytics-driven fraud prevention

As part of a wider initiative to develop a central analytics hub, Nationwide enhanced its fraud prevention capabilities by creating a tool that helps the building society to detect fraudulent activity in its members accounts. Nationwide uses SAS® Enterprise Miner™ to power this tool.

“Flexibility and speed of response were our key criteria when choosing an analytics solution to support fraud prevention,” Parsons says. “Without fast analytics capabilities, we would be unable to spot potentially fraudulent behaviour before it is too late. SAS Enterprise Miner satisfied both criteria, delivering the rapid, robust capabilities we were looking for.”

To ensure that analysts could realise the full potential of SAS Enterprise Miner, Nationwide engaged SAS to train key members of its analytics teams on all aspects of the solution.

Graeme Reed, Senior Manager of Analytics at Nationwide, adds: “The SAS team provided us with excellent support, helping our analysts become expert users and guiding us on industry best practices. SAS also helped us understand how other leading financial institutions are applying analytics technology.”

As well as training SAS Enterprise Miner to build profiles on its members’ typical account activity, Nationwide is applying the solution in a proof of concept aimed at preventing credit card fraud.

“We are now building a credit card fraud risk scorecard using SAS Enterprise Miner,” Parsons says. “The scorecard will incorporate multiple data sets from across our business, including member behaviour, transactional and demographic information. By crunching this data, SAS Enterprise Miner will help us identify which credit card payments are potentially fraudulent, so we can cancel them before they go through, and pinpoint accounts that fraudsters may be trying to use. So far, we’ve seen positive results and we look forward to taking the tool into production.”

Keeping members’ hard-earned money safe

With SAS Enterprise Miner powering its fraud detection capabilities, Nationwide can spot fraudulent activity with greater accuracy to keep consumers protected against criminals, including APP fraudsters.

“We have seen the accuracy of our fraud detection capabilities greatly improve using SAS,” Parsons says. “We expect this accuracy to improve even further as we input even more data to the system when we roll the solution out for our credit card services.”

With greater accuracy in detection results, Nationwide also reduces false positives—empowering the building society to provide even better service by interrupting fewer genuine payments.

“We’ve seen the positive impact of our new fraud detection capabilities for our consumers,” Parsons explains. “For instance, one of our members had submitted a large payment for a family house to an account he hadn’t paid into before. We noticed that this account behaviour was unusual and contacted the member. After he checked the sort code and account number on the invoice he had received, he noticed that he came very close to becoming a victim of APP fraud. Fortunately, we were able to save this member from potentially losing a huge amount of money.”

“From a business perspective, SAS Enterprise Miner is also helping reduce the risk that we are exposed to,” Reed adds. “With full transparency into how and why the solution decides to block a transaction, we can always justify our actions and avoid taking on additional liability.” With SAS driving its fraud prevention activities, Nationwide is well-prepared to adapt to any regulatory changes to how banks must protect their members’ money. “Thanks to SAS technology, we can stay ahead of the criminals and help prevent our members from becoming victims of fraud, all without causing any disruption in the quality of our banking services,” Parsons concludes.

1 Bhas, Nitin, “Retail Banking: Digital Transformation & Disruptor Opportunities 2017-2021”, Juniper Research, February 2017
2 Vocalink On The Grim Facts Behind Financial Crime’s $1.4T Toll, PYMTS.com, October 2, 2018, https://www.pymnts.com/news/security-and-risk/2018/vocalink-financial-payments-crime-corporate-fraud/