Home Artificial Intelligence Shaping a New Future for Fraud Prevention, by Neha Narkhede at QCon San Francisco

Shaping a New Future for Fraud Prevention, by Neha Narkhede at QCon San Francisco

by Joey De Leon

Generative AI has emerged as a groundbreaking technology in various industries, and its potential in fraud prevention was highlighted by Neha Narkhede during her keynote speech at the recent QCon San Francisco conference. Narkhede discussed the limitations of current fraud detection methods and how generative AI can revolutionize the field.

Narkhede began by providing an overview of the evolution of fraud detection techniques. She categorized them into three generations, with each generation building upon the strengths and weaknesses of its predecessor. The first generation relied on rule-based systems, which followed simple “if-this-then-that” principles. While this approach was easy to manage, it quickly reached its limits in complex situations.

The second generation combined rule-based systems with traditional machine learning, allowing for the analysis of high-dimensional data. However, this method was time-consuming and data exhaustive. Narkhede introduced the third generation, which utilizes generative AI in conjunction with traditional machine learning. This combination enables superior fraud detection by recognizing complex and evolving fraudulent patterns while significantly reducing false positives.

Technological advancements have not only improved fraud detection methods but have also given rise to new and more sophisticated fraud techniques. Automation has allowed fraudsters to refine their methods, posing challenges for companies that have to strike a balance between customer experience and fraud prevention. Synthetic identity fraud, in particular, has become a rapidly growing trend in the industry.

Existing fraud detection methods have their shortcomings. Data imbalance is a major issue for machine learning algorithms, and both rule-based and machine learning-based methods often lack context, making fraud detection challenging. Continuous adjustments and human intervention are necessary to keep up with the adaptive nature of fraud. Additionally, the scalability of these models is limited, particularly as transactions become increasingly complex.

Narkhede proposes generative AI as a solution to overcome these challenges. Generative AI enables adaptive learning, allowing models to continuously learn from the latest transactions and adapt to new patterns. Human feedback can enhance model accuracy over time, and these methods offer privacy-compliant benefits even without human oversight. Generative AI can greatly reduce false positives and improve precision through sophisticated algorithms.

During her presentation, Narkhede conducted a demo showcasing how an interaction with a generative AI agent could look like. The agent could analyze risk flows and highlight similar cases, enabling the blocking of larger amounts of fraud simultaneously. This demonstrates the potential of generative AI to streamline fraud prevention processes and enhance efficiency.

In conclusion, Narkhede emphasizes the importance of AI risk decisioning in fraud prevention. With the assistance of a generative AI co-pilot, humans can make more informed fraud decisions. These AI models can explain why certain transactions are fraud-prone and learn from minimal examples to identify emerging trends. By improving the efficiency and accuracy of risk decisions, organizations can dramatically reduce human effort and establish scalable fraud and risk programs.

Generative AI has the potential to transform the state of the art in fraud prevention, enabling businesses to stay one step ahead of fraudsters. By leveraging the power of AI technology, organizations can enhance their fraud detection capabilities and protect themselves and their customers from evolving fraudulent schemes.

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