Data Mining and Bank Fraud

Are you aware that data mining and bank fraud are somewhat related? Yes, the information that banks have about their clients is useful in curbing bank fraud. But before we discuss this relationship, let us first settle the matter of data mining.

What is data mining, actually? This is the process used to mine data that the clients themselves provide to their preferred banking institutions upon opening of their accounts. But of course, banks have to get the data first. Then, the banks need to create a data warehouse where all the information is stored and protected, ready for retrieval anytime. The clients give this information freely. Usually, banks ask for transaction preferences, investment desires, and financial history even with other financial establishments. 

How do banks use this information? From the data gathered, banks can customize their services so that they can provide just what their clients want. What’s so great about it is that the clients will get to think that they just cannot do without that service. Plus, the data does not intrude into clients’ privacy as they comply with central bank regulations and government laws.  

Through data mining, banks can find out what a client does before transferring to another bank. Banks can also get customers’ profiles including the products they are likely to buy and the default/bad loans that they have. Then, data mining is also good for determining the services that customers really like and are actually looking for. 

So, what is the relationship between data mining and bank fraud?

The transaction transparency provided by an organized system of information gives banks the ability to detect fraudulent patterns of behavior in their clients. Because of the speed with which fraudulent acts are noticed, banks can take the right actions to stop fraud and keep it from happening in the future. 

New information obtained from the software through banking transaction is useful for determining how a certain client uses the bank or does his transaction. Data mining for anomaly detection can flag bad checks at the teller window. With the help of real time fraud management systems, banks can protect their assets and their clients’ investments from fraudsters.

 

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