Transaction analysis is the process of examining bank transactions to look for fraud or other issues. To reduce fraud, banks need to analyze checks, ACH payments, loan transactions, debits, and credit card payments. Some of this happens manually, but software is beginning to play a larger role. Here’s a primer of this process.
Debit and Credit Card Transaction Analysis
With credit or debit card purchases, the transaction analysis starts with authentication. An automated system checks the credit card number, matches the address or zip code with the information on the account, validates the security code, and makes sure there are enough funds to cover the transaction.
This process also involves some additional fraud detection filters. For instance, some banks or creditors instantly decline international purchases. In other cases, if the spending amounts or patterns don’t match the account’s profile, the bank also may automatically reject the transaction.
To illustrate, imagine someone usually only has one or two debit card transactions per month, but then, in a single day, five transactions appear on their account. In this case, the bank’s transaction analysis software may flag those transactions as potential fraud.
To reduce the rate of fraud with debit cards, banks also need to monitor the amounts related to ATM withdrawals and deposits. Again, changes in patterns should trigger a fraud alert or a request for manual review. In addition to withdrawals, the program should also keep an eye on repetitive deposits that may indicate check kiting or similar types of fraud.
ACH/Check Transaction Analysis
Check analysis includes analyzing the basic elements of the transaction such as the amount and the frequency compared to the customer’s usual activity. Beyond that, this type of analysis looks for out of range check numbers, duplicate check numbers, and other obvious signs of trouble.
To ensure optimal protection, banks and credit unions should also use tools such as automated signature verification software that compares signatures on the check to signatures in the customer’s file. Check image analysis tools go a step further and look at the actual image of the check to detect minute issues that potentially indicate a fake check has been printed.
Transaction Analysis for Loans
Fraud can even happen with loans, which is why it’s important to analyze these transactions as well. The analysis should look at changes to the loan rate or similar issues that may indicate a cyber breach.
Beyond that, banks need to monitor lines of credit for changes in distribution rates. For example, if a customer has been approved for a HELOC but hasn’t made any withdrawals for several months, a sudden spate of withdrawals potentially indicates fraud. Similarly, if there are unusual changes to how interest checks are disbursed, that should also be earmarked as potential fraud.
For transaction analysis, SENTRY: Detect is one of the most effective tools on the market. In addition to helping analyze the above transactions, this fraud detection software can also analyze internet banking transactions, mobile banking transactions, and wire transfers. At SQN Banking Systems, we can help you set up this fraud analysis tool as well as others. We offer fraud protection you can trust—contact us today.