GROUP 23

Case Study 9.2

1) A major part of a bank’s partnership with customers is giving them trust by ensuring that
they are safe against fraud, whereby security must be matched with ease of access by
legitimate customers to services of the bank.

Having said this, the reason for investment in detection of fraud is because of its high
demand of customers as well as the loyalty assurance that the bank provides its
customers. It can be said that if high security of fraud detection is not placed then bank
might occur losses and customers will also lose out their money risking the banks
reputation when fraudulent activities occur. Despite at times due to high amount
transactions, the bank might reject risking the fee income in order to protect customers
and reduce frauds. As fraud losses are operational expenses that hurt the company's
bottom line, credibility, and customer base.

Cost-benefit analysis: The business has a client base of over 54 million people. And if
just 3% of the accounts were hacked, the total loss would be over $1.6 million.
Assuming a loss of 1% of the accounts due to unchecked fraud or improper
customer transaction rejection resulting in account churn, and an average account
balance of $1,000 in those accounts, this could result in a loss of business of $540
million, almost 8% of their pre-tax profit for 1Q 2014, easily justifying the
investment cost.

2) A) To minimize rejecting legitimate purchases by authorized customers

I) Bank will incur a loss on revenue earned on its transaction fee but will provide
assurance to customers that more criteria’s are assessed by the bank to process
online transaction which as a result provides assurance to customers that bank
is safeguarding their cash safely and not allowing a lot of unnecessary
purchase on huge amounts.
B) To minimize the risk of making customers victims of fraud
I) Promotes customers assurance of protection of their asset and the loyalty of
customers is also gained

3) As for approving transactions, the scores might differ depending on the source of
transaction occurring from which reliable or unreliable source.

Having said this, a score from 1 to 5 on amounts that are more than $1000 often has an
unreliable online source that indicates that the transaction is fraud whereas on the other
hand, a score of 6 to 10 on amounts below $1000 or above if the transaction is from
local online stores and has reliable connections with its transaction from the bank.
 4) Approved decisions are usually undertaken within a split second because the banks often
have to deal with million transactions and also the time constraint for its customers
should be processed fast in response to online and EFTPO’s transaction.

Yes, the customers would have to tolerate a brief delay in the approval process in order
to reduce their risk of identity theft because when the decisions are made within a split
second, there is a possibility that the bank may incur a loss through the mistakes hence
theft. Therefore, customers delaying the approval process will save them from incurring
identity theft.

5) Some ways in which a financial firm has been defrauded or harmed include:
 Cash-out
 Fake ID cards
 Skimming
 Jackpotting
 Dishonored or non-negotiable cheques which is often been used as forgery to
fraud banks
 Lastly, internal threats: Since banks depend too heavily on informal
management mechanisms, assigning a broad variety of duties to each employee,
this may give employees the opportunity to commit fraud.

Group Members.
Nishita Lin (S11164035)
Kartik Chand (S11171326)
Taraniti Jiope (S11133762)
Manasa Vio (S11146185)
Vanessa Kai (S11161617)
Jeremiah Manehanita (S11138516)
Warsha Prasad (S11171136)
Seth Pule (S11152210)