By Gus Tomlinson, Chief Product Officer at GBG
Identity fraud has no respect for international or company borders. It’s a constantly evolving, global issue that’s impacting all businesses everywhere – with fintech it’s no exception. More troublingly, fraudsters are raising their game and harnessing the power of artificial intelligence (AI) and machine learning to launch widespread, complex attacks. If this were a movie, we could say it’s getting harder for the good guys to fight the bad guys. But it’s not a movie, it’s real life and the threat posed by criminals can be totally devastating.
Fintech under threat: the rise of sophisticated fraud
GBG’s research this year shows an alarming increase in the sophistication and volume of fraud attempts over the last 12 months – and fintech appears to be a key target. A quarter of the fintech fraud professionals we spoke to around the world said sophisticated fraud is a major threat to their businesses. Deep-fakes, AI-generated videos, pictures and audio clips, and fake identity documents, are becoming increasingly convincing and hard to identify.
Criminals, intent on wreaking havoc to line their own pockets, are exploiting this new technology for their benefit, creating highly convincing false identities, which are then reused across different industries to commit fraud at an unprecedented scale.
This trend has had a significant impact on organisations, but it is also having an impact on people’s lives. Employees have been scammed into transferring millions to fraudsters, lured into doing so by deep-fakes of CEOs and senior business leaders. No less pernicious is the spread of online misinformation, using deep-fakes of celebrities, politicians and other public figures.
The maturing technology is obviously concerning, but the way in which it is being used is giving real cause for alarm. Fraud is making criminals large sums of money, and the industrialisation of fraud is of huge concern across all industries and in every country.
Onboarding intelligence: early detection means early prevention
Bearing in mind the sheer scale of the challenge, we can see how vital it is for fintech businesses to build an accurate picture of all potential customers from their very first interaction, to decide whether they are trustworthy or potentially dangerous
Unfortunately, despite its potential to stop criminals early, too few organisations prioritise fraud detection at the account opening stage. The majority of investment goes on activity during payment or withdrawal stages. This could leave an organisation dangerously exposed, highlighting the need for more robust onboarding processes that stop criminals from entering a business in the first place.
United against fraud: the power of collaboration
The question is, even if fintech businesses do raise their game when it comes to catching criminals during their very first interaction, how can they improve on fraud detection?
Fraud is now so pervasive and industrialised that only a truly holistic approach and collaboration is going to work when it comes to putting a stop to its devastating impact. Identity intelligence consortiums, which connect transactions taking place around the world and share international consumer intelligence between businesses, are becoming more popular as increasing numbers of organisations realise the value of knowledge and data sharing.
Sadly, our research reveals that while businesses see the benefit of working alongside others to combat fraud, concerns around data privacy and potential loss of competitive advantage is preventing them from collaborating. If businesses are not part of such a group, they risk losing out because they will not benefit from the early insights that can pre-empt crime detection and stop fraudsters before ever entering a business.
Organisations across all industries, including fintech, must be more willing to share identity intelligence to fight fraudsters. Sharing consumer intelligence to combat fraud does not mean a business will lose its competitive advantage – quite the opposite. The fact is that businesses do not share raw data within consortia, but anonymised patterns and insights on confirmed or suspicious fraud. This has a huge benefit for all businesses – regardless of sector or location. Afterall, criminals don’t limit fraud attacks to one business, industry or stop at national boundaries.
Why wait? Cross-sector collaboration is business critical
Intelligence sharing empowers fintechs to apply friction where necessary, stopping fraudsters at the first opportunity. Significantly, it can also be a strategic differentiator in beating fraud, allowing businesses to recognise good customers and in turn ensure an exceptional user experience. Because data and insights are anonymised, this can be achieved without sacrificing data privacy or a competitive advantage. It’s a no-brainer.
Companies are already working together to achieve a new commonly held objective: building trust in digital identities, and more collaboration brings more power in the fight against fraud. Building trust is becoming a common concern and a collective endeavour for brands that rely on identity confidence to do business. Fintechs shouldn’t wait for regulation to take this step but understand the value it can bring now and act. Fraudsters aren’t resting on their laurels, and neither should we.
By developing a data-sharing network between industries all businesses can benefit from real-time fraud intelligence and start to build up a global view of digital identities that will become increasingly valuable in the battle against fraud.
#CollaborationInFintech #FraudPrevention #FintechPartnerships #FintechInnovation #CybersecuritySolutions
