With billions of dollars, corporate reputations, customer loyalty, and criminal penalties for noncompliance at stake, financial firms must outsmart fraudsters. Detecting and preventing fraudulent transactions across many lines of business (checking, savings, credit cards, loans, etc.) and online channels require comprehensive real time data analytics to assess and score transactions. That is, each transaction has to be analyzed within a split second to calculate the probability that it is fraudulent or legitimate.
A big part of a bank’s relationship with customers is giving them confidence that they are protected against fraud, and balancing that protection with their need to have access to your services.
HSBC is a commercial bank known by many as the “world’s local bank.” HSBC is a United Kingdom–based company that provides a wide range of banking and related financial services. The bank reported a pre-tax profit of $6.8 billion in the first quarter of 2014 (1Q 2014). It has 6,300 offices in 75 countries and over 54 million customers.
Fighting Fraudulent Transactions
HSBC was able to reduce the incidence of fraud across tens of millions of debit and credit card accounts. The bank implemented the latest Fraud Management software from SAS. The software includes an application programming interface (API) and a real time transaction scoring system based on advanced data analytics. Using the Fraud Management app, HSBC has reduced its losses from fraudulent transactions worldwide and its exposure to increasingly aggressive threats. The antifraud solution is live in the United States, Europe, and Asia, where it protects 100 percent of credit card transactions in real time.
Consider this scenario. A credit card transaction request comes in for the purchase of $6,000 in home appliances. The bank has a moment to decide to approve the transaction, or reject it as potentially fraudulent. Two outcomes are possible:
• Legitimate purchase rejected: When a legitimate purchase is rejected, the customer might pay with another card. The bank loses the fee income from the purchase and the interest fee. Risks of account churn increases.
• Fraudulent purchase accepted: When a fraudulent purchase is accepted, a legitimate customer becomes a victim of a crime. The bank incurs the $6,000 loss, the cost of the fraud investigation, potential regulatory scrutiny, and bad publicity. Chances of recovering any losses are almost zero.
With trillions of dollars in assets, HSBC Holdings plc is a prime target for fraud. Fighting all forms of fraud—unauthorized use of cards for payment and online transactions, and even customer fraud—has risen to the top of the corporate agenda. Fraud losses are operating costs that damage the bottom line.
As required by regulations, HSBC has implemented policies to segregate duties, create dual controls, and establish strong audit trails to detect anomalies. In addition, the bank has antifraud technology, which includes SAS Fraud Management, to monitor and score the millions of daily transactions. It is the cornerstone of these efforts.
In 2007 HSBC’s first SAS implementation went live in the United States, which was their largest portfolio with 30 million cards issued there. All transactions were scored in real time.
Detection rates on debit ATM transactions have been very effective. HSBC has updated its Fraud Management solution multiple times as newer technology and threats emerged.
Of course, financial fraud morphs to avoid new detection methods so antifraud models have a very short shelf life. Once HSBC closes up one loophole, thieves devise new threats to exploit other potential vulnerabilities. To counteract threats, fraud-monitoring algorithms and scoring models require constant refreshing
Sources: Business Wire (2011), SAS.com (2014), Reuters (2014), YouTube video “HSBC Relies on SAS for Comprehensive Fraud Detection.”
1. Analyze the reasons to invest millions of dollars to detect and prevent fraudulent transactions. In your evaluation, do a cost–benefit analysis to show why the investment cost is worthwhile.
2. Review the two outcomes of the fraud scenario. Assess the business implications of each of the following two goals. Explain why these goals are conflicting.
a. To minimize rejecting legitimate purchases by authorized customers
b. To minimize the risk of making customers victims of fraud
3. The Fraud Management solution is based on a scoring model. For example, assume the scores range from 1 to 10, with 10 being the highest probability that the transaction is fraudulent. What cutoff score would you use to decide to approve a purchase? What cutoff score would you use to decide not to approve a purchase? If those cutoff scores are not the same, how do you suggest those falling between scores be treated?
4. Why are approval decisions made in a split second? Would customers tolerate a brief delay in the approval process if it reduced their risk of identity theft? Explain your answer.
5. Research ATM or other banking transaction fraud. How has a financial firm been defrauded or harmed?
Why Work with Us
Top Quality and Well-Researched Papers
We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.
Professional and Experienced Academic Writers
We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.
Free Unlimited Revisions
If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.
Prompt Delivery and 100% Money-Back-Guarantee
All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.
Original & Confidential
We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.
24/7 Customer Support
Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.
Try it now!
How it works?
Follow these simple steps to get your paper done
Place your order
Fill in the order form and provide all details of your assignment.
Proceed with the payment
Choose the payment system that suits you most.
Receive the final file
Once your paper is ready, we will email it to you.
No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.
No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.
Admission Essays & Business Writing Help
An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.
Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.
If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.