GRC Tuesdays: How Do Fraud Management Solutions Benefit From Predictive Analytics?

Traditional Approach

The traditional approach to fraud management solutions usually relies on sets of pre-defined rules that analyze transactional data looking for exceptions that match certain criteria specified in the rules. It’s an approach that requires the expert knowledge from someone familiar with the relevant fraud scenarios, like relevant monetary threshold for suspicious transactions, other data fields to check, minimum criteria match before an alert notification gets triggered, and so on.

Leveraging Predictive Analytics

With the introduction of more sophisticated predictive analytics solutions, a thorough approach to combating fraud would integrate predictive features into rule-based fraud solutions. This approach allows fraud practitioners to benefit from the expert knowledge that went into creating the rules as well as the built-in algorithms available through predictive analytics.

Even the best pre-defined rules will become obsolete at some point, and predictive capabilities will help us keep up with the evolving nature of fraud patterns.

Benefits from a Hybrid Approach

Among the many advantages from having a combined approach, some key benefits include:

• Ability to detect known fraud patterns, based on expert knowledge and pre-defined rules
• Ability to identify unknown patterns early enough to minimize financial losses, based on predictive algorithms
• Ability to uncover connected fraud ring activities and suspicious relationships, based on predictive social link analysis

The ultimate goal of an effective fraud management program is to identify suspicious transactions early enough so that they can be addressed before any financial losses materialize. A strategy combining pre-defined rules and predictive capabilities provides the most complete approach, leveraging the latest technology available.

Additional Information

Learn more about SAP Fraud Management and how it could help your organization fight fraud by leveraging predictive algorithms and the power of SAP HANA.