Fraud Prevention in Fintech: 4 Take-Aways from Money20/20

Once again, Money 20/20 didn’t disappoint. The 2024 edition gave us the perfect opportunity to take the pulse of the global Fintech community, understand how generative AI is reshaping the industry's operations and learn about the top priorities of the financial services sector for the months to come. In the course of the three-day event, the Trustfull team on the ground met with hundreds of fellow Fintech experts, entrepreneurs, tech providers and clients. 

Now that the dust has settled, it’s the right time to share what take-aways on the state of fraud prevention in Fintech we have brought home with us, alongside all that amazing merch.

1. Fraud prevention is making waves beyond regulated industries

Money 20/20 confirmed a trend we’ve observed for a while: we are reaching a tipping point on the expansion of identity screening and verification applications beyond financial services. Although not required by regulators, many companies have started verifying users’ identities in response to rising levels of fraud on their digital platforms.

For instance, fueled by romance scam scandals like the ones described in the Netflix documentary The Tinder Swindler, Tinder has been introducing enhanced identity checks across multiple markets, including the UK and the US. Another example is LinkedIn, which has recently added an option for identity verification of its users to add a layer of trust to its professional network. 

Such efforts aim to improve the general safety of companies’ digital environments, helping users interact with others safe in the knowledge that fraud prevention controls are in place. So, as well as online dating and social media, ride-hailing services, food delivery apps and online booking platforms are following suit.

2. Synthetic identities are still out at large

With the ongoing expansion of digital services over the past few years, we have witnessed a rise in the popularity of ID document verification solutions. So-called IDV represents a sub-sector of RegTech now quite advanced and starting to become commoditized, sporting hundreds of vendors worldwide.

Many FS companies we’ve met with at Money 20/20 have already embedded ID verification within their sign-up process. This type of verification usually takes place one or two steps after the initial collection of contact details. Now, many product and compliance teams are looking for innovative ways to prevent bad actors using synthetic identities and stolen ID documents from even reaching the IDV stage.

Signing up for online services using fake email addresses and phone numbers, or a combination of legitimate and fake contact details is a lot easier than we’d like to think. Conscious of this, some of the more forward-looking IDV and biometric providers are shifting their focus to the earlier phases of the customer journey and looking for specialized partners like Trustfull to pre-validate users through a vast range of digital signals.

By cross-referencing information on provided names, email addresses, phone numbers and IP addresses, Trustful acts as a first line of defense against identity fraud in a way that is complementary to traditional IDV checks. Suspicious users are flagged instantly at the very first interaction, while legitimate users can quickly move to the next step in their onboarding journey.

3. Payment providers are expanding their 3DS protocol with digital signals 

One topic that emerged from many of our conversations was that payment providers are increasingly adding new digital signals within the 3D Secure (3DS) protocol to combat fraud more effectively. These digital signals range from enhanced biometric authentication to device fingerprinting and real-time data analytics, which together provide a multi-layered approach to verifying the identity of the user. 

By leveraging these additional signals, based on publicly obtainable data, payment providers can not only detect and prevent fraudulent transactions before it’s too late but continue to ensure a smooth customer experience for their users. 

The objective of such an expansion within the 3DS protocol is to improve the overall ability of payment providers to block fraud before it happens, ultimately leading to higher transaction approval rates and reduced financial losses for businesses.

4. It’s time to prepare for the deep-fake battle

Deep-fake frauds are already taking place, but most Fintech companies are not equipped to detect them. At Money 2020, we witnessed live tests where deep-fake videos easily bypassed traditional ID verification and liveness checks, showcasing a significant vulnerability.

It's often the case that fraudsters learn to leverage new technologies faster than the companies striving to stop them, and deep-fake technology is no exception. However, compliance teams and Fintech providers have various ways to quickly bridge that gap, if they want to.

One such strategy is employing dark web monitoring to learn about common fraudulent patterns and develop risk management strategies to protect your business accordingly.

Additionally, thinking globally and fostering collaboration among industry players is a simple yet often underutilized strategy. Scammers operate on a global scale, as exemplified by a recent case involving a Nigerian influencer, a North Korean hacker, and a Canadian scammer collaborating to commit fraud worldwide. Yet, fraud prevention efforts are typically fragmented and locally focused.

By relying on solutions with global coverage and the ability to cross-reference contact details from every corner of the world to identify inconsistencies and high-risk signals, companies can block fake users at the very first point of contact with their business, drastically reducing their vulnerabilities towards deep-fake content down the line.

At Trustfull, we enable companies to strengthen their fraud prevention efforts through advanced risk intelligence delivered in real time at every customer interaction.  Companies like Nexi, Twilio, Refinitiv, Sisal, Banca Sella, Younited and Cofidis have already chosen our solution to accurately detect fraud and financial crime attempts throughout the customer journey.  To discover how we can help your business fight fraud with the power of digital signals and non-documentary ID verification, please get in touch.