Peter Ford is Executive Vice President, Information Solutions Business for iconectiv.
Artificial intelligence (AI) is a tool. Like a hammer, wrench or any other tool, AI can be used to build up, tear down or both. That’s something to keep in mind when considering how AI affects customer experiences, bottom lines, brand reputations and more.
For example, many banks and other businesses use AI-powered biometrics to replace the traditional, tedious security gauntlet with a quick, easy experience. Speech and facial recognition free customers from having to remember and enter PINs, passwords and account numbers. AI-powered biometrics can also help the bottom line because those businesses spend less time and money fielding password reset requests and investigating fraud enabled by the common practice of using the same login credentials for multiple companies.
AI also can provide highly personalized customer experiences—the kind that boosts brand loyalty and revenue—such as with AI-powered chatbots and personal shopping assistants that use machine learning to understand each customer’s unique preferences. Those insights enable AI to help people quickly find what they’re looking for or discover products they didn’t know existed.
But hackers and fraudsters are increasingly using AI to enable new attack vectors. Some exploit the AI-powered systems implemented to provide better customer experiences. For example, AI-generated deepfakes target biometric authentication systems, with 37% of organizations experiencing deepfake voice fraud and 29% falling victim to deepfake videos, according to a 2023 Regula survey.
Some AI-powered fraud tools leverage the name recognition and interface design of their legitimate counterparts, such as FraudGPT. HackerNoon described how it can be used to create bank phishing emails as easily as ChatGPT churns out press releases, blog posts and term papers: “Users merely needed to format their questions to include the bank’s name, and FraudGPT would do the rest. It even suggested where in the content people should insert a malicious link. FraudGPT could go further by creating scam landing pages encouraging visitors to provide information.”
A Multimodal Approach For KYC
Know your customer (KYC) is the process of verifying a person’s identity to understand the risks of doing business with them, such as avoiding fraudulent transactions and money laundering. For some businesses, KYC is a government mandate, such as with the Financial Industry Regulatory Authority (FINRA) Rule 2090 in the case of financial services firms.
AI is making KYC both harder and easier because it’s a tool increasingly used by fraudsters and businesses alike. FraudGPT, deepfakes and other AI-powered hacks are driving a lot of angst and headlines right now, but savvy businesses have spent the past several years looking for ways to use AI to protect their networks, customers, brands and revenue.
One common safeguard is using AI to identify suspicious activity and then using text messages to warn affected customers. This strategy also highlights the importance of a multimodal approach for KYC processes.
Initially, a consumer needs to provide identification in the form of a photo ID, license, etc., to prove they are who they say they are. Once verified, they are assigned a phone number, which acts as a digital ID. As the user engages with their phone, AI monitors their biometrics and usage patterns to detect fraud. Customers are often notified via text or call when suspicious activity is detected, highlighting the phone number’s role as a key digital identifier.
As the preferred digital identifier, mobile numbers have become a crucial resource for businesses’ KYC processes. At each stage of the life cycle—including registration, transactions, account management and event monitoring—AI can use mobile numbers to quickly determine whether customers are really customers and not fraudsters.
Combat Fraud: Education, Data And AI Landscape
But fraudsters also recognize that mobile numbers are now the preferred digital identifier for banks, credit card companies, payment gateways, e-commerce providers, insurance companies, hospitals and other businesses. That’s why over 40% of all fraud reported to the U.S. Federal Trade Commission starts with a text message or a phone call.
This attack vector shows why businesses need a trusted, authoritative independent resource for information about each telephone number. Take the example of online payment fraud, which topped $38 billion globally in 2023 and is on track to hit $91 billion by 2028, according to Juniper Research.
Fraudsters use SIM swaps and port outs to hijack phone numbers and then use those digital identifiers to pose as legitimate customers. Hijacking numbers also enables them to receive the text messages that banks and other businesses use for multifactor authentication.
To combat fraud effectively in the AI era, businesses need to focus on three key areas:
• Consumer Education: Educating consumers is vital, as most fraud starts with a text message. By making consumers aware of these tactics, they can be more vigilant and cautious about unsolicited messages.
• AI Evolution: As AI technology evolves, so does the sophistication of AI-powered fraud. It’s crucial to stay ahead of fraudsters by continually advancing AI capabilities to detect and prevent new types of fraud.
• Deterministic Data: The foundation of effective fraud prevention lies in having deterministic and authoritative data. Businesses can better block account takeovers if their AI has instant access to information about each phone number, such as whether it was recently ported and how long it has been associated with a particular SIM. If this data suggests fraudulent activity, the AI can require the person to provide additional information, such as mailing address, account number, PIN or mother’s maiden name.
Accurate, continually updated phone number information provides another layer of protection against attacks that exploit the drawbacks of other types of identifiers, such as inconsistent names and addresses or spoofed IP addresses. This authoritative phone number information empowers AI—and contact center staff—with insights to overcome these challenges and effectively protect against fraud.
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