Bank Fraud: Using Technology to Combat Losses

CHAPTER 2

Quantifying Fraud: Whose Loss Is It Anyway?

Considering the long history of banking and the need to manage funds and fraud, fraud detection using data analysis is a relatively recent phenomenon. However, the growth in this area has followed a trajectory similar to the trajectory of technology in general but perhaps with a lag in start time. Back in the late 1980s when I immigrated to the United States, I didn't know what a computer looked like. Now my life and the lives of everyone around me are irrevocably interwoven with the digital world. Could anyone have imagined the kind of impact computers would have on our day-to-day lives today even as late as 25 years ago? Isn't it amazing how far we have come?

If we look at the use of data not just from the point of view of understanding what has happened in the past but from the perspective of using the data to decide what can be done in the future, I would say the use of data is still somewhat limited. If we look at the proliferation of data in this world, it is moving at a much faster rate than computers have in the past few decades. The executive chairman of Google, Eric Schmidt, said, “I spend most of my time assuming the world is not ready for the technology revolution that will be happening to them soon.”¹ I believe that we actually haven't seen all that much yet; the best is yet to come.

This chapter examines the origin of credit and debit cards (which still are a very significant portion of a bank's fraud numbers) ...