The Mitek Identity Intelligence Index 2024, conducted in January 2024, sheds light on the evolving threat landscape facing financial institutions (FIs) worldwide and highlights the challenges they face in safeguarding people, their finances, and their data.

The global survey, commissioned by Mitek and Censuswide, involved 1,500 financial services risk and innovation professionals across the UK, US, and Spain.

Its purpose was to statistically validate concerns voiced by industry leaders and assist them in preparing for emerging threats.

Key findings from the survey include:

Diverse fraud threats challenge banks

Financial services' risk and innovation leaders are grappling with a range of fraud types. The biggest threats reported include money laundering (25%), account takeover (23%), and forgeries (21%). However, the most pressing challenges cited by 37% of respondents are the rise of AI-generated fraud and deepfakes.

Battle to keep up with evolving threats

A significant 32% of risk professionals estimate that up to 30% of all transactions are fraudulent, underscoring the complexity of today's fraud landscape. The real-time evolution of these threats demands constant vigilance to protect customers and combat fraud.

New customers pose highest risk

The study reveals that new customers represent the greatest risk.

Banks cite customer onboarding or account setup as the most fraudulent (42%) and risky (41%) aspect of the customer journey. Alarmingly, nearly 1 in 5 banks find it challenging to identify customers at any stage of the journey, despite global Know Your Customer (KYC) regulations.

Call for regulatory intelligence and tech simplicity

Banks emphasise the need for better understanding of the latest regulations (36%), a reduction in technology complexity (36%), and real-time responsiveness to customer requests (36%) to enhance customer protection.

Regarding security measures, 41% of fintech professionals have identity verification in place compared to 33% of mature banks.

Additionally, around 1 in 3 banking professionals use liveness detection (36%) and biometrics (32%) to prevent and/or catch fraudulent attacks.

Fraud and financial services: inevitable?

Chris Briggs, SVP Identity, Mitek Systems stated: “In today's banking world, overwhelmed by an increasingly complex fraud landscape, we know vigilance starts at the front door. The good news is that 99% of consumers are good. To improve their risk profiles, financial institutions across the board need to direct investments to futureproofed, end-to-end technologies.”

Furthermore, in a conversation with Private Banker International, Marc Sabadi, identity innovation lead at Mitek Systems, spoke about other obstacles that banks can encounter.

PBI: Can you explain what the Identity Intelligence Index is and why it's important for banks?

Marc Sabadi (MS): We hear anecdotes every day from our customers and company leaders about concerns that affect financial institutions in keeping people, their money, and their data safe. The Mitek Identity Intelligence Index 2024 aims to statistically validate what we hear from those leaders, giving the market context into the complex fraud landscape and how the changing threat landscape is impacting consumers. Banks want to do right by their customers and fight fraud, but they face the constant challenge of keeping up with threats, such as the rapid sophistication in generative AI-enabled scams, as they evolve in real-time. 

PBI: What are some of the key challenges banks face in managing identity and preventing fraud?

MS: The rising sophistication of technology, and now gen-AI, has altered the fraud and identity landscapes, intensifying banking leaders' fear of the unknown. We know that banks care about their customers and allocate and prioritise substantial resources to understand and safeguard them.

Nevertheless, the index found just over one-third (34%) of banks today struggle to prove the identity of their customers. Technological investments can only help when banks establish an efficient system for consolidating all customer interactions, past and present, into a cohesive and transparent framework.

Leaders face a constant challenge of keeping up with threats as they evolve real-time so they can do right by their customers and fight fraud. Almost a third (32%) of risk professionals estimate that up to 30% of all transactions are fraudulent; providing insight on how complicated the fraud landscape is today.   

PBI: How do you think the evolving fraud risks and changing regulations impact banks' ability to provide a seamless customer experience?

MS: Every bank has an appetite to mitigate risks – particularly at a time when three-quarters (76%) of banks believe fraud cases and scams have become more sophisticated, as found in our index. Banks are on the front lines of the evolving threat landscape, meaning that controls and regulations are much more stringent than in other sectors.

Fraud prevention technology that is compliant with changing regulation often adds a layer of friction to the customer experience – it is a friction that is essential for banks and expected by customers. 

Banks face a triangle of dilemmas: compliance, fraud, and friction. It’s up to them to ensure they are managing all three in the best way that they can, that keeps the business in line with the law, safeguards from scams, and gives consumers the best possible experience. Adding to this complexity, regulations and requirements differ across markets. 

PBI: Why is it important for banks to modernise their technology infrastructure, and how can they do so?

MS: Modernising technology infrastructure is critical to combat the rapid proliferation of gen-AI fraud and deepfakes. Without modern methods, financial institutions cannot hope to defend themselves against fraudsters. 

Newer technology helps FIs stay competitive, enhance operational efficiency, and effectively manage risks and reputations and meet evolving customer expectations, improve customer satisfaction.

PBI: What steps can banks take to gain a deeper understanding of the latest regulations, and why is this important?

MS: No matter the size of the FI, everyone must have a general understanding of regulations and what they mean for themselves, their company, and their customers. By understanding the latest regulations and how they affect the business and the market, FIs can mitigate regulatory risks, maintain trust and credibility with stakeholders, avoid penalties and sanctions, safeguard the integrity of the financial system, and protect their customers.

PBI: What do you think the future holds for banks in terms of managing identity and preventing fraud?

MS: Banks will move away from siloed identity checks to integrated and holistic approaches. Banks know their customers are more than just their ID. With persistent Know Your Customer (KYC) activities, FIs can ensure they holistically check, verify, and authenticate who their customers are during the entire customer lifecycle. 

 They will combine different signals, behaviour and data and move towards a future of reusable digital identity. The regulators are following suit too and banks play a pivotal role in the adoption of federated identities and education so that they and their members can defend against fraud collectively.

 To remove technological complexity, banks need a deeper relationship with fewer vendors, rather than lots of solutions. This is where the move to a holistic approach will continue, providing the entire cycle of the customer identity management in just a few trusted partners. 

With fraud becoming more sophisticated by the day, the financial services sector faces a daunting challenge to stay ahead of the curve.