Fraud prevention and fraud detection are two distinct but interconnected concepts representing mutually reinforcing strategies and approaches to combat fraud. Here's a breakdown of the differences. Fraud prevention is a set of policies and processes to reduce the risk of fraud before it happens, while fraud detection is the process of recognizing fraud as it’s happening so it can be stopped.
Fraud prevention focuses on implementing measures and controls that proactively reduce the likelihood of fraudulent activities occurring in the first place. This approach aims to create barriers and deterrents that make it difficult for fraudsters to initiate or carry out their schemes. Fraud prevention strategies include:
Remember fraud prevention is an ongoing process that requires a combination of technology, policy enforcement and user education to be effective. Different organizations may need to tailor their strategies to their specific industries, user bases and risk profiles.
Fraud detection is a set of processes to help identify potential fraud risk by monitoring the customer lifecycle, including transaction activities, new account openings and account access requests.
Fraud can happen at any point in the customer journey, so it’s important to businesses and consumers that fraud detection is active at each point as well. The more business is served digitally and remotely, organizations and their employees and customers face increased risks. Fraudulent activities carried out by people, networks or automated bots focus attention at key points along the customer journey that demand protection. Broadly speaking, there are three main areas of risk to address with fraud detection:
Remember the effectiveness of fraud detection during these customer touchpoints may vary based on the specific context, data quality and the nature of fraud being targeted. A combination of multiple fraud detection techniques and continuous adaptation is often necessary to more effectively combat the ever-evolving fraud landscape.
Fraud prevention aims to create a secure environment that discourages cybercriminals from attempting fraud, while fraud detection focuses on identifying and responding to ongoing fraudulent activities in real time. Both prevention and detection are essential components of a robust fraud strategy —working together to reduce the risk and impact of fraud on individuals and organizations.