In the war against fraud, Proactive Risk Manager, a
solution combining technological expertise of ACI Worldwide and
IBM, is swinging the odds in favour of banks. Executives from the
vendors and one of the solution’s newest users, Westpac New
Zealand, provide insight into the solution’s major
Seeking a more dynamic defence against fraud, Australian bank
Westpac’s New Zealand unit has joined a growing number of financial
institutions worldwide to opt for Proactive Risk Manager (PRM), an
enterprise risk management solution powered by ACI Worldwide
software and running on IBM’s System z server platform.
A key advance presented by PRM is the transformation of risk
management from one undertaken in isolation in each of a bank’s
separate business units – the so-called silo approach – to an
approach where risk is monitored on a unified enterprise-wide
basis. Results speak for themselves.
“Within a few days of implementing PRM it alerted us to fraud which
we were then able to prevent,” Terry Mortensen, head of fraud and
security at Westpac New Zealand, told EPI. PRM has been installed
initially to prevent fraud on credit, scheme debit cards and
Westpac’s experience is not isolated, said David Divitt, an ACI
fraud and risk solutions consultant: “Interception of fraudulent
transactions enabled an Australian bank to cover its PRM project
costs in three months.”
Even more impressively, a bank in the UK covered its PRM project
costs in just one month, he added.
Included among PRM’s automated features is the ability to recognise
fraud schemes such as identity theft, phishing and account takeover
fraud and covers debit, credit, online branch and wholesale
payments, said Allison Aldred, ACI’s Pacific region customer
manager. Additional functionality including merchant and anti-money
laundering which are offered as separate modules for PRM are being
combined into one enterprise solution.
Unsurprisingly PRM has attracted a significant number of users
since its first implementation some nine years ago. There are now
about 150 financial institutions using PRM and none of them have
taken more than 12 months to recoup project costs, said Aldred. In
total the number of PRM installations is approaching 200 while, in
addition, about a further 1,000 financial institutions access PRM
services through processor relationships.
“Banks are seeing advantages of consolidating their risk management
on an enterprise-wide basis,” said Divitt. “They are appreciating
that PRM gives them power and flexibility to combat fraud.”
PRM is also highly scalable and is capable of handling volumes of
up to 15 million transactions per day, Divitt added.
Flexibility of the PRM automated risk management solution is
particularly evident in its rules-based functionality providing the
ability to adapt to a bank’s specific requirements. These are
influenced by factors such as risk-alert sensitivity and
country-specific fraud risks.
On the issue of risk-alert sensitivity Divitt explained there has
to be a considered balance between intercepting fraudulent
transactions and Inconvenience caused to customers.
“We consider how many legitimate customers are going to be impacted
when implementing real-time rules,” he said.
He continued that PRM is highly flexible and that in rules
formulation anything on a bank’s database can be used to monitor
for suspicious activity. Rules applied are very personalised to
each customer base – for example, on the size of typical
transactions, types of retailers and the location of transaction
On the approach taken by Westpac, Mortensen said rules adopted
encompass value of transaction, frequency of transaction, type of
merchant and even type of transaction such as card present or
“Essentially any parameter associated either with the card or the
transaction may be used to asses the potential fraud risk,” said
He added that Westpac New Zealand is seeing a global shift of
payments and customer behaviour and therefore places importance on
the ability to compare a customer’s location and behaviour against
the transaction being made.
“Many of our customers now provide us with details of their
overseas travel plans so that we can use this information to assess
the potential fraud risk when reviewing transactions,” said
Although major fraud trends tend to span countries, certain types
of fraud can be more country-specific and for this reason PRM is
highly adaptable in the types of fraud risk being monitored, noted
Expanding on this Mortensen said some fraudulent payment activities
such as cross-border fraud or CNP fraud span countries and are not
specific to New Zealand.
“However, there are some examples of financial crime that we have
been encountering more than other countries such as counterfeit,”
He continued that as financial crime becomes more international
Westpac New Zealand is seeing an increase in cross-border fraud,
particularly counterfeit and CNP fraud. There has also been a rise
in first party fraud committed by account holders in recent
Another big advantage of PRM, said Aldred, is that manual work
involving large volumes of exception reports is cut significantly.
In the Pacific region, she added, this is enabling PRM users such
as Westpac to monitor for fraud 24 hours, 7 days a week and
reintroduce real-time payments processing.
Attributes such as these of PRM and of ACI’s other key software
solutions such as its BASE24-eps payments engine attracted the
attention of IBM, leading in 2007 to the forging of a strategic
alliance between the two companies. A particularly close alliance,
it has seen ACI adopt IBM’s platforms for deployment of all its
“IBM saw benefits of working together with ACI,” said James Wallis,
IBM vice-president, responsible for the ACI alliance. He explained
that ACI’s strength is application software while IBM’s strength is
in strong relationships with financial services companies in
addition to its technological input.
Wallis continued that IBM and ACI are working closely on
development work and are co-funding projects. For ACI an added
benefit is access to IBM’s development laboratories.
Given the fast recouping of costs on solutions such as PRM IBM’s
alliance with ACI is particularly pertinent in the current tough
“Banks are generally not interested in spending on big projects,”
said Wallis. “But if they can see a return in six to nine months
they will spend.”