How to Prevent Fraud Proactively?

Today’s topic is related to the three important and effective ways to prevent the risk of fraud with a proactive approach. In order to use anti-fraud strategies, you need to be more alert and look around the corners to detect such happenings before they happen.

Since the rise of Covid-19, Fintech companies and other financial services have faced challenges to prevent fraud. 

According to the Aiteo Group, from 2018 to 2020, the cases of mobile and online fraud losses increased. And as per 27% of financial institutions’ surveys, online losses were more than 10%, and mobile losses were also over 10%. So, how can financial institutions and Fintech companies prevent such losses? 

The best way to prevent fraud is to build a proactive approach against the growing number of frauds. Here’s how FinTechs can prevent fraud proactively.

3 Key Elements to Prevent Proactive Frauds in Fintech:

1. Digital and Physical Identity Elements for Accurate Risk Assessment

According to Kount, it is important to have 100% verified documents of each user and customer to prevent fraud. Financial institutions and companies need to focus on verifying all the users’ documents with the help of digital and physical identity elements to ensure the accuracy of the documents. This helps in preventing the use of fake and stolen documents during onboarding.

When we talk about physical identity, we include social security numbers, payroll information, credit history, phone number, addresses, and tax IDs. And, when we talk about digital identity elements, we include account modification information, email addresses, login behavior, device information, payment information, account creations, and geolocation. The physical and digital elements are helpful for Fintech companies. Even financial institutions use digital ID data to get a complete profile of their users to minimize the risk of fraud.

2. Adaptive Authentication for Minimal Friction Customer Login Experiences

Adaptive authentication is an important step to verify a user’s identity to be able to trust the user or customer.  

If a user or customer is doubtful about their identity, then the financial institutions and banks can step up for multi-factor authentication. With the help of multifactor authentication (MFA), it will be easier to determine a user’s trust based on their transaction frequency, billing address, geolocation, IP address, a device used, and account age. 

According to the financial surveys, the account takeover fraud rates are over 10%, which is more than before the pandemic.

The two key benefits of using adaptive authentication are that it helps prevent account takeover attacks, and the second is that it helps provide a smooth login experience for returning and new customers. Adaptive authentication is valuable for banks and Fintech companies to expand their customer base with less friction and risk of fraud. 

According to Benjamin Teal, Fintech and AltFi Industry Expert for Equifax, “As we start to see younger consumers seek financial services, fraud mitigation strategies need to be refined to incorporate evolving consumer behavior. “

He further said, “We know that younger consumers are digitally native and have fewer obligations requiring them to remain in one place. As a result, they engage in behavior that looks very different to older consumers. Sophisticated strategies will factor in these generational differences and create experiences that lead to higher conversion while keeping bad actors out.”

3. Deep Data Insights to Determine Identity Trust

Financial institutions and FinTech companies need more than just payment-related data to uncover identity theft issues. Identity theft can appear in different stages during the account creation process, application, and payment event, and log in. And, to prevent the risk of identity theft, the FinTech companies and financial institutions need relevant data to decide if the customer is genuine or not.  

In the recent webinar, O’Neill, the Enterprise Account Executive for Kount, said, “It’s not necessarily enough to look at payments data to compete against some of the largest banks and card brands, which have massive data networks. “

O’Neill further said, “When it comes to payments-related data, it’s really easy for big banks to say they know what a normal payment looks like and therefore know what an abnormal payment looks like. And that’s true, but you need more than that to make the best decisions.”

There are other fraud indicators like email addresses, geolocation, country codes, transaction amounts, and BINs.  

And to prevent the fraud related to these indicators, it is better to use a global network of fraud and trust-related signals. 

Once the payment data is combined with all the above elements, you can get a more accurate image to prevent proactive fraud in Fintech.

DIRO for Proactive Fraud Prevention

  1. DIRO’s document verification technology is great for Fintech companies and financial institutes for the instant verification of documents from the original source.
  2. With the help of DIRO’s document verification, the companies can save time and resources.
  3. Manual verification of data can lead to various errors, and the chances are high that manual a person could not identify real or fake documents.
  4. With the help of DIROs, you can get 100% verified documents from the sources, which means no chance of fraud and fake document threats that can lead to huge losses if not identified at the time.