Fraud XDR: Smarter protection for modern banking

The battle against online banking fraud is intensifying. Attackers are becoming more sophisticated, exploiting vulnerabilities long before a fraudulent transaction even takes place. 

Traditional fraud detection methods, once the cornerstone of banking security, are struggling to keep up. Why? Because they focus primarily on transactions, detecting fraud only when it’s already happening. But by that point, fraudsters have already bypassed security measures, taken over accounts, and left financial institutions scrambling to mitigate damages.

To truly stay ahead, banks must rethink their approach. The future of fraud prevention isn’t just about detecting fraudulent transactions - it’s about stopping fraud before it happens. This is where Fraud Extended Detection & Response (FxDR) comes in. Unlike conventional security systems, FxDR provides a holistic, real-time view of the entire digital banking experience, allowing financial institutions to detect and stop fraudulent activity before it escalates.

To explore why banks can no longer rely on outdated fraud prevention models and how FxDR is reshaping the future of online banking security, we sat down with Mick Morris, Product Director at Cleafy.

Traditional fraud detection methods have been the cornerstone of banking security for years. Why are they now proving insufficient?

Traditional systems primarily focus on monitoring transactions to identify suspicious activity. However, modern fraudsters have become adept at bypassing these measures by targeting the entire user session, often gaining control before initiating any transaction. This shift necessitates a more comprehensive approach that offers end-to-end visibility, allowing banks to detect and prevent fraudulent activities at every stage of the user journey.

Fraudsters don’t rely on a single method to exploit institutions and victims. Instead, they use varied strategies—such as Account Takeovers (ATO), Automated Transfer Systems (ATS), and Authorised Push Payment (APP) scams—to bypass security measures. That’s why we implement a layered approach to fraud detection, integrating multiple detection methods rather than relying solely on transaction analysis.

How does Fraud Extended Detection & Response (FxDR) address these challenges?

FxDR is changing the game in fraud prevention. By continuously monitoring user behaviour and interactions in real time, FxDR can identify anomalies indicative of fraudulent intent long before a transaction occurs. This approach allows financial institutions to act quickly, stopping threats before they become fraud.

Cleafy’s FxDR platform goes a step further by ensuring visibility across web, mobile, and API channels, from pre-login interactions up to and beyond the transaction. This holistic approach enables the fastest, most efficient response, effectively safeguarding against a spectrum of threats and combating fraud at its source.

AI is often mentioned in the context of modern fraud prevention. What role does it play in FxDR?

AI is integral to the efficacy of FxDR. However, the AI employed must be both explainable and adaptive. Unlike opaque "black-box" models, our AI-powered platform provides transparent insights into decision-making processes, ensuring that security teams understand the rationale behind each alert.

​​Our capabilities employ microservices and modular AI principles, producing a set of targeted micro-models that don’t require extensive training on labelled fraud data. This means our AI can quickly adapt to emerging attack patterns, even those never seen before. The result? Cleafy’s system is up and running within days—not months—delivering immediate value while ensuring long-term resilience against evolving threats.

Many banks already have established fraud detection systems. What advantages does integrating FxDR offer to these institutions?

It’s good to have established detection systems - the fight against fraud ultimately requires many layers. However, while existing systems may offer a degree of protection, they often operate in silos and react to threats too late in the user journey. FxDR enhances these setups by adding a real-time, pre-transaction layer of defence that integrates all interactions across channels and sessions so that the full digital narrative or story is available for analysis. This integration not only strengthens the bank's security posture but also streamlines operations, reducing both fraud-related losses and the operational costs associated with managing such incidents.

In our case, we are lucky to have our expert threat intelligence team, recognised globally by industry bodies, government, and law enforcement agencies, which plays a critical role in fraud prevention. Insights from their investigations are directly embedded into our platform as a global threat intelligence layer. This ensures that intelligence sharing and risk signals from across our customer network strengthen every institution’s security posture.

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Implementing new security measures can be daunting. How does Cleafy facilitate a seamless integration of FxDR for banks?

At Cleafy, we've designed our FxDR platform with ease of integration in mind. Our solution seamlessly meshes with a bank's existing security infrastructure, operating at the most granular level of the network and application traffic. Hence, it is unobtrusive in providing real-time threat intelligence, device and application integrity, behavioural analytics, and automated response capabilities. 

Additionally, Cleafy’s approach doesn’t rely on a single detection method but rather uses a combination of granular data collection across devices, applications, networks, behaviour, and transactions. This data is analysed through multiple purpose-built detection models, producing deterministic, human-readable risk signals. These signals can be leveraged for tailored responses instead of simply feeding into an overall black-box risk score, giving banks full control over mitigating threats.

For banks and financial institutions aiming to stay ahead of fraudsters, what key takeaway would you share?

A proactive approach is paramount in the battle against fraud. Relying solely on traditional, reactive measures is no longer sufficient. By embracing FxDR, banks can detect and prevent fraudulent activities before they impact customers, safeguarding their assets and reputation.

Threat actors constantly evolve tactics, and financial institutions must stay one step ahead. Cleafy’s approach consistently outperforms traditional fraud detection methods, often predicting fraud an average of 15 days before a fraudulent transaction occurs. By leveraging our expertise, technology, and global intelligence-sharing framework, banks can effectively neutralise fraud threats with pinpoint accuracy, preventing attacks before they result in financial losses.

Thank you, Mick, for taking the time to share your thoughts and answer our questions. Keep following Cleafy to learn more about how to stay ahead of fraud and where to meet our fraud experts!