Cutting edge fraud mitigation tools will grow in importance
Blockchain is bringing a new new world to core banking businesses and operations. Banks are working on multiple proof-of-concept initiatives focused on enterprise blockchain. At least 150 blockchain applications are being tested by banks and their partners. A few corporations are co-developing applications with bank partners. Pan-industry and banking-specific consortia have formed to promote open source standards and drive enterprise blockchain innovation.
So far, banks have taken the lead in three areas: cross-border payments, trade finance, and know-your-customer/anti-money laundering. Businesses are gradually exploring internal ledger and supply chain applications. As proofs of concept solve real problems, Celent expects banks, their third party tech partners, and commercial clients will set precedents over the next five years. Likely within a decade, we will see central banks using blockchain and issuing a digital version of fiat currency.
While the main impact of enterprise blockchain will be on efficiency, we believe that blockchain will also help reduce fraud in banking and commerce. It, however, is not a fraud panacea. Given that the technology is too immature to genuinely assess its impact on fraud, unforeseen risk vectors are likely to emerge. As blockchain solutions are gradually introduced, the attacks on the “legacy” infrastructures are likely to increase. Hence, we expect that tools at the cutting edge of fraud and financial crime prevention today will only grow in importance tomorrow. For example, machine learning applied to behavioral analytics can help identify anomalies in the user or transaction “behavior,” which can, in turn, catch bad actors and prevent multiple methods of compromise, such as phishing, malware, social engineering, and others.
In addition, as the use of cryptocurrencies increases, their vulnerability to illicit use, fraud, and breaches will have to be mitigated.