NOTO: Why Increasing Your Security Budget Isn’t Stopping Financial Crime

Tristan Prince from NOTO highlights a critical problem in the battle against financial crime: despite increasing investment in fraud prevention, fraud levels are still rising.

According to a recent Gartner survey of fraud professionals, 53% of businesses in the UK plan to increase their spending on fraud prevention and financial crime solutions by 5% over the next 12 months. Yet, 70% of those same businesses acknowledge that fraud and risk levels are actually going up. This creates an unusual scenario, almost like a “bell curve” as companies typically allocate 3% to 5% of their IT budget to cybersecurity and fraud prevention. Yet, Prince points out that once organizations increase spending to more than 10% of their IT budget, the amount of fraud and risk they identify actually starts to go down.

The main reason for this paradox is “operational drag” as when companies layer in multiple siloed solutions, such as separate systems for application fraud, transaction monitoring, and account takeover, the sheer volume of capabilities and data points clouds judgment. Since these different systems are not communicating with one another, trying to prevent fraud at scale becomes harder, not easier. NOTO believes the UK market is currently “heavily fragmented”, making it incredibly difficult for a Chief Risk Officer or fraud director to get a clear picture of the overall risk facing their organization. This fragmented environment is where platforms like NOTO become essential to connect and consolidate all the scattered information.

Having worked in the field for 27 years, Robert Brooker from Opus Advisory Group stresses how quickly the fraud landscape has evolved; payment fraud is now frictionless and fast. However, simply acquiring more technology is ineffective if the implementation and configuration are not correctly managed. The industry often reacts to incidents by “firefighting” and buying a quick fix rather than establishing a proactive, forward-looking tech strategy and Opus Advisory Group argues for a necessary “convergence” across financial themes, including compliance, risk, cyber, fraud, and AML.

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