Banks and online retailers can significantly improve their ability to capture hard-to-detect high-risk fraudulent transactions through combining shared fraud intelligence into their risk assessments, according to the latest Global State of Fraud and Identity Report from LexisNexis^® Risk Solutions.

Examples include a US bank that boosted its ability to detect high-risk events by 17 times or 1700% through combining email address risk with broader digital identity signals, such as device intelligence and IP address. Similarly, a top US card issuer combined digital identity, email and physical data, such as postal address, to boost high-risk transaction detection by a factor of 23.

Currently, only around one in four or 27%¹ of financial services and online retailers in the EMEA region employ consortia or risk insights exchange initiatives as part of their fraud prevention technology.

A shared collaborative network enables organizations to flag suspicious activity relating to device, IP address, email address and others, to help all members improve their fraud risk assessments. For instance, a device displaying negative behaviors poses a five-times greater risk of subsequent fraud compared to baseline, analysis shows. If anti-fraud solutions flag a device and email address relating to a single identity, the fraud risk is eight times² greater than baseline. Trusted customers also benefit from these shared networks, since member organizations can flag trusted devices to boost recognition of genuine customers, speeding up login and transaction time.

Such improvements in fraud detection can also result in significant savings for organizations. Metro Bank, a top 10 UK bank, uncovered over £2.5 million of fraudulent payments within six months — marking a 105% improvement – using a collaborative risk insights model to spot outgoing proceeds-of-fraud payments to mule accounts. The model also later found one in eight of the accounts flagged during the period to be mule accounts, helping to protect the bank from the risk of additional fraud losses and regulatory fines.

"On their own, email address, digital signals such as device intelligence and verified identity components can reliably detect certain aspects of identity manipulation, but when used together, they become significantly more powerful for assessing application risk that would otherwise be invisible to banks relying on just their own view of customers," said Stephen Topliss, vice president of fraud and identity, LexisNexis Risk Solutions.

"Organizations that share fraud risk intelligence gain a more comprehensive understanding of fraudulent activities, which allows them to predict and pre-empt the next moves of fraudsters," Topliss added. "Sharing intelligence magnifies insights, revealing connections between disparate incidents that might otherwise go unnoticed. Moreover, it streamlines processes by reducing investigation times and allows humans to focus efforts on the most severe threats, thereby elevating fraud prevention success rates. Collaborative networks enable businesses to genuinely understand the complex, networked inter-relationships between every transaction, building this into a digital identity over time."

Another major UK bank increased the value of its fraud detection by £1.7 million in just one month by analyzing collaborative email intelligence, including email address age, domain and composition. Newer email addresses and ones used to create accounts in a cryptocurrency marketplace within the past month were also found to carry much higher risk than others, according to the analysis.

Topliss continued, "As fraudsters network with one another and develop increasingly sophisticated strategies, no organization can stand alone in effectively countering their threats. It takes a network to combat networked fraud. Collaborative networks that leverage the power of shared knowledge, risk insights and technology enable organizations to share critical information about fraud trends and patterns in a safe and compliant way. This pooling of resources, combining technological advancements with diverse expertise, creates a robust defence system that far exceeds the capabilities of any single entity or organization."

The Global State of Fraud and Identity Report draws from both the underlying datasets of the LexisNexis® True Cost of Fraud™ Study and the LexisNexis® Risk Solutions Cybercrime Report 2023.