Grupo Financiero Banamex, Mexico’s largest financial group, currently has some of the lowest fraud losses in Latin America. But nine years ago, fraud losses had jumped to more than 100 basis points, and the bank’s false positive ratio was at 50:1. Banamex was also challenged with a detection rate of 25% and a very low recovery rate.
“It was a mess trying to manage our fraud problem using the point solutions we had at the time,” says Liberto Ferrer, country fraud risk officer at Banamex, now a subsidiary of Citigroup. “We were spending a lot of time looking at suspicious accounts that were not fraud. We needed to more rapidly identify new fraud patterns and points-of-compromise, and reduce the time between fraud occurrence and detection.”
Banamex decided to build a fraud solution that combined several technologies, including rules-based technology, neural networks and data mining. Adds Ferrer, “We developed an integrated system that could analyze authorizations in real time and respond instantly. Falcon Fraud Manager was an essential part of this solution.”
Integrated fraud solution
“As soon as Falcon went live in 1996, we saw our fraud losses plunge,” says Ferrer. “After our merger with Citigroup in 2002, we saw a similarly dramatic drop in fraud losses on the Citigroup portfolio once we began using Falcon.”
Since implementing Falcon, the bank has lowered its fraud losses from 100 basis points to 8, while reducing its false positive ratio from 50:1 to 11:1. Banamex has also lowered its fraud loss amount per account, improved the speed of its fraud detection, increased its detection rate and reduced its referral rate (see results chart).
Banamex has dramatically improved its fraud detection and decreased losses using Falcon Fraud Manager.
In addition, Banamex has benefited from the real-time capabilities of Falcon. The solution’s neural network models act quickly to identify fraud. Through a direct link between Falcon and its authorization system, the bank stops many fraudulent transactions at the point-of-sale before the transaction is complete.
Adaptability to change is critical
When Banamex first tackled its fraud challenges in 1994, the fraud landscape in Mexico was significantly different. The majority of fraud activity came from solitary embezzlers, anti-fraud legislation was weak, and there was little fraud experience in the banking community. Today, fraudsters have gotten increasingly sophisticated, while anti-fraud laws are tougher, and financial institutions have become more savvy in combating fraud.
Throughout this change, Falcon Fraud Manager has continued to play an integral part in the Banamex fraud solution. “The fraud environment is always shifting, and fraud characteristics are often unpredictable,” explains Ferrer. “A flexible system like Falcon can adapt to this change, so that our losses and false positives stay low.”
“Our business is to sell, not to detect fraud,” says Ferrer. “Falcon Fraud Manager has proven to be adaptable over time, and has allowed us to focus on true fraud and respond more quickly than ever before. This has allowed us to stay focused on what’s most important: growing our business.”