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Digitalisation, automation and combating fraud at banks in Germany

How the financial sector is changing and what can be done to combat document forgery

There is a long tradition in the world of managing and lending assets collectively and thus making business even more profitable: although digitalisation and automation in the financial sector are changing the banking system significantly, it has basically been characterised by a three-pillar structure in Germany since the German Empire: Private commercial banks (such as Deutsche Bank AG) operate alongside public-sector banks (such as savings banks and Landesbanken) and cooperative banks (such as Volksbanken-Raiffeisenbanken or GLS-Bank).

Less cash, more financial products

The digitalisation of the banking sector has changed a lot for financial institutions in recent decades. In what way?

Online banking and mobile payment options have massively changed payment behaviour, cash plays less and less of a role

  • Banks have been more strictly regulated since the 2008 financial crisis
  • The traditional business model of many banks has been severely challenged by the phase of low interest rates until 2023
  • Competition in the banking sector has increased due to FinTechs and large technology groups
  • At the same time, the issue of sustainability is becoming increasingly important for the financial sector as well

Modern document fraud in the lending process

Digitalisation and automation are both a challenge and an opportunity for the banking industry. This is because efficiency gains are at risk of being lost if incorrect decisions are made on the basis of incorrect information.

In the area of lending, for example, document fraud is a problem: manipulated payslips, false bank statements, fictitious guarantees - the list of possible frauds is long. Exact figures on the annual volume of losses caused by document fraud are even more difficult to estimate in the banking sector than in the insurance industry, but it is also assumed that they run into billions. In some cases, banks do not even realise that defaulted loans were granted on the basis of falsified documents. Here too, the burden is borne by the honest community due to costs that are higher than they should actually be.

Intelligent document processing for banks

To achieve efficiency gains through digitalisation, banks are already using automation in document processing. Software that combines optical character recognition with content extraction methods is called IDP software (intelligent document processing software). But when is IDP used and what are many of these solutions good for?

IDP-Lösungen werden zur Bearbeitung von Kreditanträgen, Nachweisen für Baufinanzierungen oder bei der Kontoeröffnung eingesetzt.

Es wird immer öfter auch auf sogenannte Self-Service-Strecken gesetzt, das heißt, die Antragsstellung und -bearbeitung erfolgt komplett digital.

Viele dieser Lösungen erzielen nur schlechte Auslese- und Extraktionsquoten, wenn Dokumente in dürftiger Smartphone-Foto-Qualität vorliegen.

Challenges for IDP solutions

A practical IDP solution must be able to work flexibly with a variety of document layouts. A modern document recognition solution should have the following capabilities:

High-calibre image recognition: straighten documents even from strangely photographed perspectives and remove distortions

Excellent text recognition without special characters or incorrect spaces as well as optimal content capture and contextualisation

In addition: Separate document batches, recognise incorrectly uploaded documents and assign documents to the correct classes

What ICO-LUX can do for banks

Automation not only enables savings, but also opens up opportunities for fraudsters. In some cases, these savings are levelled out. ICO.Match is a document recognition software that was developed in close professional collaboration with banks and insurance companies and is precisely tailored to their needs. Whether smartphone photo or PDF - ICO.Match recognises the document type and reliably extracts the desired content. Optimisations are always possible with little effort and in a data-saving manner, as the solution is based on a combination of AI and rule-based approaches.

ICO.Fraud goes one step further: this software offers automated document checking that is seamlessly integrated with document automation using ICO.Match. Documents relevant to banking transactions, such as copies of bank statements or payslips that have been manipulated before submission, can thus be recognised reliably and in good time, for example before an incorrect credit decision is made.

What makes ICO.Fraud so valuable for banks

Fraud checks with ICO.Fraud only use data that is already collected in the business process - there is no need to query account access for an X2A procedure, for example, which increases acceptance on the customer side. In addition, savings can be achieved by avoiding follow-up costs and long processing times for applications. For example, a video ID or QES provider can be dispensed with if the documents submitted have already been proven to be forged. In order not only to recognise forged and manipulated documents and make better decisions as a financial institution, but also to protect themselves preventively against manipulated documents, it makes more than sense for banks to use all products from the ICO-LUX portfolio. Please do not hesitate to contact us!

Any questions? 
Let's talk.

Jan Franke

+49 3641 92 90 988 jf@ico-lux.com