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15 July 2024

Credit card fraud costs global economy US$32 billion, AMF study finds

Published
By WAM

The Arab Monetary Fund has disclosed that global credit card fraud losses incurred by financial institutions and individuals reached an estimated US$32.3 billion in 2021, marking a substantial increase of 13.8 percent compared to the previous year.

In its recent study titled "The Role of Artificial Intelligence and Machine Learning in Enhancing Credit Card Fraud Detection," the Fund highlighted that these challenges have compelled financial institutions and decision-makers to explore innovative approaches leveraging modern technologies like artificial intelligence and machine learning, coupled with their applications on big data, to detect and analyze fraudulent transactions.

The study emphasised that artificial intelligence plays a pivotal role in strengthening credit card fraud detection, with machine learning algorithms significantly contributing to achieving a predictive accuracy surpassing 94 percent.

Furthermore, the report recommends the widespread adoption of AI and ML for scrutinizing credit card fraud operations within Arab countries. Such measures are crucial for assisting financial institutions and regulatory bodies in risk management and cost reduction, particularly as fraudsters increasingly exploit modern technologies. This necessitates alignment with the evolving global landscape in fraud prevention.

The report calls for intensified innovation and collaboration with leading financial technology firms to develop new, machine learning-based fraud detection systems. Such partnerships offer financial institutions the opportunity to harness the full potential of these cutting-edge tools for more effective fraud prevention.

Additionally, the report stresses the need for continuous development and updates to regulatory frameworks governing fraud detection systems. Ethical and responsible data usage, transparency, and accountability guidelines should be integral components of these frameworks.

The report urges financial institutions to foster cooperation by sharing data and pooling resources in their fraud detection efforts. Collaboration between these institutions and supervisory and regulatory authorities can help identify fraud patterns spanning multiple organizations, making it more challenging for fraudsters to switch between institutions.

Highlighting the global nature of the challenge, the study underscores the importance of strengthening regional and international cooperation to combat credit card fraud. This collaboration could involve knowledge exchange, data sharing, adoption of best practices, and the implementation of new technologies within the confines of local laws and regulations. The establishment of international standards and regulations was also emphasised as an essential element in this endeavour.