By Clive Summerfield, CEO of FARx
Moderating the “Speed vs Security: Tools for Fighting Fraudsters” panel at Fintech Fringe was a real eye-opener. Joined by industry leaders shared their insights on tackling fraud. Here’s a recap of, arguably, the most important discussion of the day.
The Growing Threat of Fraud
Fraud is a persistent menace for banks and financial institutions. In the UK alone, 40% of all crime involves fraudulent accounts and activities. Fraudsters made off with £1.2 billion in 2022, with £485 million stemming from Authorized Push Payments (APP). These alarming figures underscore the need for robust fraud prevention strategies.
Diverse Channels and High Costs
Fraud can originate from various channels. While 78% of fraud originates online, telco services account for 44% of fraud-related costs, demonstrating the necessity for a broad range of technologies and methodologies.
It was clear from the conversation that understanding the nuances of these channels is crucial for developing effective prevention mechanisms.
Technological Advancements in Fraud Prevention
Innovative technologies are transforming fraud prevention. At FARx, we leverage continuous biometric authentication to provide seamless and secure user experiences. Here are some key technologies discussed during our panel:
- Machine Learning and AI: Juspal Manic from Featurespace emphasized how large transaction models predict fraudulent behaviour by analysing transaction patterns. This proactive approach to fraud detection doesn’t require extensive data science teams and is a game-changer.
- Identity Verification (ID&V) and Authentication: Priya Guliani of EarthID highlighted the importance of advanced ID&V technologies, such as FARx multi-modal biometrics (voice, speech, and face recognition) to ensure continuous, frictionless security.
- Open Banking and Data Sharing: Brendan Regan of Plaid explained how leveraging bank attributes and creating fraud networks that share data on bad actors can significantly enhance fraud detection capabilities. This collaborative approach is essential for staying ahead of fraudsters.
Balancing Speed and Security
One of the most difficult challenges discussed, true to the theme of the session, was the balancing act between speed and security. Overly stringent measures can slow transactions, adding friction and delays that frustrate users. This can lead to lower sentiment toward, and adoption of, fraud prevention technologies. On the other hand, inadequate security can lead to significant financial and reputational losses, while eroding consumer trust.
Priya Guliani highlighted the growing impatience among users who demand instant, seamless transactions. Technologies like FARx’s continuous biometric authentication can be integrated into a fraud prevention stack to effectively balance security and user convenience as part of a wider suite of fraud mitigation techniques and technologies.
Regulatory Frameworks and Future Outlook
Regulatory support is crucial for advancing fraud prevention technologies. The introduction of PSD2 (Payment Services Directive 2) and the anticipated PSD3 regulations in Europe aim to enhance security while maintaining transactional efficiency. All agreed that a robust legislative framework is needed to facilitate open data sharing without compromising privacy.
Looking ahead at the convergence of AI, machine learning, and decentralized identity systems, this, alongside biometric inputs, will shape and define the future of fraud prevention. Privacy-enhancing technologies will play a pivotal role in enabling secure data sharing between institutions without exposing sensitive information.
The fight against fraud in the financial sector is at a critical juncture. Leveraging advanced technologies and fostering regulatory support can create a secure, efficient financial ecosystem. Insights from the panel underscore the importance of innovation and collaboration in staying ahead of fraudsters.
At FARx, we are committed to driving innovation. Our continuous biometric authentication technology ensures secure, seamless user experiences, making us a vital ally in the fight against fraud. Embracing cutting-edge technologies and regulatory frameworks will enable financial institutions to protect themselves and their customers from the ever-evolving threats of fraud.