Stopping Fraud Across the Entire Financial Customer Lifecycle

Summary:

• Consumers are increasingly managing their banking accounts online, making banking fast, simple, and convenient
• Fraudsters are taking note of this online migration and are leveraging GenAI to create fast, realistic, and scalable digital forgeries
• With bad actors targeting every stage of the customer lifecycle, financial institutions must adopt an identity-centric approach to fight fraud while maintaining a seamless user experience

Remember the days when you went to a brick-and-mortar bank branch with your driver's license to open an account? And then you would often have to wait days – or maybe even weeks – for the debit card or checks to arrive in the mail? Back then, fraud and cyber threats were slower too, matching the pace of these one-to-one physical interactions.

Fast forward to today … The AI age of the digital era has completely changed the financial game. The transition from the physical world to a digital one has accelerated in banking. In fact, a 2024 study revealed that 77% of consumers prefer to manage their bank accounts through a mobile app or a computer. Banking and online payments are now fast, simple, and convenient for all of us. The catch is that “all of us” also includes bad actors.

With GenAI, fraud is fast, hyper-realistic, scalable, and cheap. For the first time ever, fraudsters are creating more digital forgeries than physical counterfeits, with digital document forgeries increasing 244% in the last year. From new account creation to everyday transactions cashing out, bad actors operate at every stage of the customer lifecycle. This means financial institutions need to meet fraudsters at these points and resecure each phase of the customer lifecycle.

Old habits, new cyber risks

Resecuring the financial customer journey starts with taking into account the current state of fraud. AI-generated synthetic identities and deepfakes continue to surge, causing fraudulent new account creation, issuance fraud, and account takeover (ATO) attacks. And now AI-powered phishing and smishing scams are tipping the scale, sophistication, and realism of these cyberattacks.

What’s worse, long-life data like financial records are at significant risk of being compromised by quantum computing, especially with “Harvest Now, Decrypt Later” attacks already underway. Today’s public key cryptographic algorithms (such as RSA and ECC) underpin the security around the movement of money and transactions as well as the protection of vast amounts of sensitive financial information. But eventually quantum computers will be able to crack the traditional encryption algorithms that are safeguarding payments and finances, posing a colossal threat to the global financial system.

With the post-quantum era on the horizon, the time to prepare is now. Some banks and financial institutions, like BMO Financial Group, are already making the transition to post-quantum cryptography (PQC). As the arrival of cryptographically relevant quantum computers (CRQCs) – signifying a time many are calling Q-Day –  looms, so does the need to assess PQC readiness and ensure the protection of customers’ financial transactions and records.

Identity-centric focus on customer management

When securing the financial customer lifecycle, the very nature of consumer behavior cannot be overlooked. Consider the balance of the user experience and security strategies: Too much friction from security and prevention measures during the customer journey can lead to application abandonment or customer drop-off. However, too little protection makes a financial institution an easy target.

Managing risk in the financial customer lifecycle requires a holistic security strategy that leads with identity – all while walking the fine line between a seamless user experience and security. Some of these measures to improve an organization’s security posture while building customer trust include:

• AI-Powered Biometric Identity Verification: Modern biometrics, such as fingerprints or facial recognition, offer a much higher level of security by using unique physical traits that are difficult to replicate. But biometric spoofing and morphing attacks still pose threats. Harnessing the power of AI, financial institutions can analyze data in real time, evaluating factors like behavior patterns, device data, or anomalies to measure the risk of a login or transaction. A multi-faceted approach to identity verification that blends biometrics and AI makes it harder for fraud to go undetected.
• Multi-Factor Authentication (MFA): Prioritizing trusted identities starts with authentication. A mechanism like multi-factor authentication takes credentials to the next level, requiring multiple layers of verification. These layers can include knowledge (a password or PIN), possession (OTP, push notification, and hardware tokens), or inherence (biometric verification such as fingerprint ID or facial or voice recognition).
• Customer Identity and Access Management (CIAM): CIAM certifies that customer identity data remains unified throughout all platforms, including supporting various login stages or integrating with social media platforms. And using adaptive authentication (or risk-based authentication) provides another level of authentication assessment, especially for high-value transactions or unusual activity.
• Cryptographic Data Security: Prioritizing cryptographic security posture management by investing in a solution that provides comprehensive visibility can help financial institutions manage all their cryptography across the entire organization. With a unified security, compliance, and risk dashboard in place, CISOs can quickly locate and patch potential risks, detect malicious cyber activity, assess vulnerabilities, secure data, and proactively reduce the risk of threats.
• Zero Trust: Zero Trust today is more than a tagline; implementing a Zero Trust architecture is a critical best practice for every institution. While 61% of organizations have begun their own Zero Trust journey, every institution must adopt an enterprise-wide Zero Trust framework to ensure “Never Trust, Always Verify” and continuously authenticate.
• PQ Preparedness: As previously mentioned, preparing for the post-quantum era begins now. While less than half of organizations globally (41%) were actively preparing for PQ in 2024, now is the time to assess your organization’s readiness for PQC. If your organization hasn’t done so already, start planning for PQ migration strategies, including performing an inventory of cryptographic systems and assets, ensuring a mature crypto-agile practice, and investing in PQC-secure solutions to future-proof your security infrastructure.
• Mobile Wallets and Tokenized Payments: These technologies use encryption to protect data during transactions and biometric authentication to ensure that only authorized users can access their accounts. This combination of security features helps prevent fraud and unauthorized access, making it a reliable choice for secure financial transactions. 

The intensifying fraud landscape means financial institutions must prioritize their cyber hygiene and resecure the customer lifecycle now. From account opening and onboarding to everyday transactions and account closure, adopting an identity-centric approach at each phase will effectively mitigate threats while improving the user experience – ultimately driving customer trust and business growth.