Insights Thought Leadership

Decreasing Fraud Loss for a Midwest and Northeastern Bank

Decreasing Fraud Loss


Fraud, Predictive Analytics, OASIS

Financial institutions utilizing ARGO’s Fraud solution, OASIS™ (Optimized Assessment of Suspicious Items), have seen a significant decrease in fraud loss, resulting in a quantifiable return on investment (ROI).

Data used in a study at a Midwestern Bank included on-us check data with the standard MICR data for each check, image analysis results for running check stock, and signature verification, along with indicators for whether the check was good or a fraud missed. The testing period contained 36 fraud items for a total of $1.44MM. The ARGO models analyzed transaction amounts greater than $500. OASIS achieved a 96 percent detection rate using metadata analysis and image analysis. Sixty-seven percent of the fraudulent items failed check stock and signature verification.

The average daily false positive rate declined dramatically from 1,250 with the legacy system to only 250 with OASIS, reducing analyst review labor costs by 80 percent.

A study at a Northeastern U.S. Bank measured the impact of ARGO OASIS on fraud using check metadata only—no image analysis.

The data set, which was approximately 115MM items, contained the standard MICR data for each check, along with indicators for whether the check was good, a fraud detected by the bank’s fraud prevention system, or a fraud missed by the bank’s fraud prevention system. Results showed that OASIS improved detection rates by 68 percent and reduced false positives by 14 percent (reducing disposition FTE labor by this amount). Considering bank loss (after claims collection and recoupment) was $4.8MM in the prior year, the ARGO system would have detected $3,322,910, resulting in a total actual fraud loss of only $1,477,090.

The bank would have also reduced labor costs to review an average of over 5,000 suspect items each day (around one percent of the bank’s on-us check volume). Assuming an annual cost per FTE of $85,000, the bank could reduce labor costs between $120,000 and $143,000 in FTE resources by reducing the staff from 12 to 10.3. If the bank retained the same number of FTE analysts to review the same number of alerts (5,000 per day), the bank would have improved the detection rate by 77 percent, saving over $3.5MM.

ARGO’s OASIS has increased effectiveness of check and ACH fraud detection for seven of the top 10 financial institutions and nearly 500 other national banks, super-regional banks, regional banks, community banks, and credit unions. Customers range in size from $425 million to $225 billion in assets, including 35 of the top 100 banks in the U.S.

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