Building an End-to-End Digital Trust & Safety Solution for Fintech
By Kathryn Schneider /
28 Jun 2021
The fintech industry has seen tremendous growth in the past five years, with new, innovative businesses disrupting the financial services and banking world like never before. But fraudsters are evolving at the same pace, making it critical for fintech businesses to equip themselves with the best tools to protect their company—and their customers.
During our recent webinar, Digital Trust & Safety: Building an end-to-end solution for fintech businesses, Jane Lee, Trust and Safety Architect at Sift, and Bala Kumar, Chief Product Officer at Jumio, discussed trends in fintech fraud and how to implement a comprehensive solution that accounts for the entire user journey.
Types of fintech fraud
No matter the financial service, whether it be banking, crypto, PSPs, or remittances, nearly all financial services are faced with multiple pain points when it comes to fraud. Cybercriminals can take advantage of every step along the user journey, including account creation, login, withdrawal, and the deposit of funds. And when it comes to payment service providers (PSPs), this risk is compounded because of the opportunity for attack from both the merchant and payer sides. So, for many fintech businesses, the only way to effectively fight fraud is to take into account the entire user journey and ensure that all of these bases are covered.
Although some types of fraud, such as account takeovers and fraudulent card transactions, may be fairly traditional fraud tactics experienced in a variety of industries, fintech businesses are seeing even more vectors of attack as new technologies and modes of payment are introduced. A few of the many types of fraud fintech businesses may encounter include:
- Stolen/synthetic identity sign-ups (third-party fraud)
- Fraudulent ACH deposits
- Fraudulent withdrawals or transfers
- Account takeover
- Fraudulent card transactions
- Money laundering
- Micro deposit
- COVID-related economic relief fraud
Why fintech is so attractive to fraudsters
Typically, when a particular industry or business experiences a growth spurt, fraudsters follow. But there are many other reasons that fintech is so attractive to fraudsters. For one, fintech is a growth-oriented industry and strives to gain as many users as possible to maximize profit. The industry is also focused on accessibility and equity—removing barriers to entry historically experienced with traditional banking and providing services to a population that may have been underserved in the past. The risk of removing these barriers and points of friction, such as offering low or no fees and no minimum balance requirements, is that there are more opportunities for fraudsters to manipulate the system. And fintech being inherently mobile- or digital-first provides all the more ways for bad actors to launch attacks across more surfaces.
Kumar explains why it’s so important to have fraud checks in place to combat these fraudsters looking for weaknesses to exploit: “It’s critical to at least start getting some form of controls in place because let’s face it, fraudsters are looking for the least friction. They don’t want to be spending too much time and energy trying to break into something. And even the slightest idea that there are decent controls in place is going to send them off to other areas that they can exploit. Fintech is super attractive for fraudsters—they are well sophisticated. And knowing that you have some deterrents in place will hopefully ward them off.”
Building an end-to-end solution
Faced with such a complex fraud landscape, or Fraud Economy, coupled with the unique risk factors within the fintech industry, businesses must have solutions in place that are capable of protecting the entire customer lifecycle. In the process of blocking bad actors, businesses must be intentional about enabling trusted customers as well. Lee explains why fraud prevention solutions are about not just preventing fraud, but building brand loyalty:
“Why is it important for each business to care about this? It’s because if you have that poor user experience on your platform, there are so many competitors that someone can move over to. And so it’s in I think everyone’s best interest to make sure that they build this trust within their platform.”
When looking for fraud prevention services, it’s crucial to find a holistic solution that helps protect and grow your business. With Sift Digital Trust & Safety, online businesses can quickly implement scalable fraud prevention strategies that don’t limit growth for the sake of protection. Sift uses patented, real-time machine learning and over 70B events per month from our merchant data network to proactively detect payment fraud spawning from the Fraud Economy, enabling merchants to refine, scale, and streamline their trust and safety operations. Based on these tens of thousands of signals, Sift can accurately designate a Sift Score from 0-100 to determine how risky that behavior is and allow customers to decide how to proceed with that transaction.
Check out the webinar to discover more about the Fraud Economy in fintech and how you can leverage Digital Trust & Safety to stay a step ahead of fraud.
Kathryn Schneider is Sift’s Content Marketing Manager, specializing in digital content that sparks lasting impact. She’s an avid hiker, art enthusiast, and dedicated nonprofit volunteer.