Artificial intelligence (AI) has improved the outcomes for hundreds of thousands of businesses by automating and speeding up their processes. Yet, it has also helped the criminals too, making it easier for them to commit fraud and steal money.
Nowhere has this been more keenly felt than in the banking and finance industry, where the technology has been successfully deployed in the fight against fraud, tackling everything from credit card fraud to money laundering. But one of the key areas where it is proving most effective is in detecting business lending fraud.
There’s no doubt that business lending fraud has been on the rise in recent years, increasing at an average of 14.5% year-over-year for small and mid-sized businesses in 2022, as per a LexisNexis report. But that’s just the tip of the iceberg, with many of these types of fraud going undetected or unreported.
How AI can help
Traditionally, combating this type of fraud would have required trawling through vast amounts of data manually. But now, thanks to the advent of AI, such checks can be done in a matter of minutes, both accurately and effectively.
Signs and patterns of fraud or suspicious activity can be quickly and easily detected using algorithms. That means it can, for example, pick up on whether the same person is making multiple applications on the same loan.
Drawing on historical trends, the technology can also compare different data sets and determine if any information is incorrect. It can also identify impersonation.
Beyond that, AI can be used in real-time to check existing loans for signs of delinquency or fraud. It can also analyse a borrower’s credit history to see what the likelihood is of them defaulting on their loan.
The fraudsters are fighting back
Despite all the positives, there are some drawbacks to using AI. The chief one is that, in the hands of the criminals, it’s being used to perpetrate fraud. As lenders continue to develop their technology, so fraudsters are using increasingly more sophisticated and clever AI tactics to find a way around it.
Then there is the problem of AI bias and discrimination. This can creep in at the machine learning programming stage, if it’s set up incorrectly by humans, thus perpetuating the bias or discrimination in its selections and findings.
These challenges aside, the benefits that AI can provide in tackling business lending fraud are far greater. They just need to make sure that they are staying one step ahead of the fraudsters in terms of the technology they use.
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