Case Study : Business Case: HSBC Combats Fraud in Split-second Decisions

Questions

1. Analyze the reasons to invest millions of dollars to detect and prevent fraudulent transactions. In your evaluation, do a cost-benef t analysis to show why the investment cost is worthwhile.

2. Review the two outcomes of the fraud scenario. Assess the business implications of each of the following two goals. Explain why these goals are con?icting.

a. To minimize rejecting legitimate purchases by authorized customers

b. To minimize the risk of making customers victims of fraud

3. The Fraud Management solution is based on a scoring model. For example, assume the scores range from 1 to 10, with 10 being the highest probability that the transaction is fraudulent.

What cutoff score would you use to decide to approve a purchase? What cutoff score would you use to decide not to approve a purchase? If those cutoff scores are not the same, how do you suggest those falling between scores be treated?

4. Why are approval decisions made in a split second? Would customers tolerate a brief delay in the approval process if it reduced their risk of identity theft? Explain your answer.

5. Research ATM or other banking transaction fraud. How has a fnancial frm been defrauded or harmed?