Table of Contents
- 1. Why Is Cyber Security Important?
- 2. How to Detect and Prevent Financial Fraud?
- 3. Two Types of Fintech Fraud and Solutions to Protect Your Institutions
The fintech sector has become a target for cyber attackers as these entities deal with sensitive customer data, a goldmine for these fraudsters. Over the years, these data have been stolen and used for financial fraud, making it harder to detect fraudulent activities. Thus, finance leaders and professionals find it challenging to handle such situations as hacking, security and data breaches, and money laundering. In today’s article, we will dive deep into how to save your firms and institutions from cybercrime with the help of case studies.
1. Why Is Cyber Security Important?
Cybersecurity’s importance is on the rise as society becomes more technologically reliant than before, and there is no sign that this trend will slow down. Undoubtedly, the fintech sector is the prime target for fraud. Whether you have a small financial business or a large multinational financial institute, computer systems, and cloud service security are things you rely on every day. As per the current statistics, the average fraud rate is 0.30%, which is twice as high as credit card fraud (0.15%) and triple as high as debit card fraud (0.10%). As more cybercriminals look for sensitive customer data and other valuable information, these companies are under pressure to establish effective strategies to fight against financial fraud.
2. How to Detect and Prevent Financial Fraud?
With the growing fraud in the financial space comes extreme risks and threats that need some solutions that will help financial professionals combat these issues. Below, we have covered the top three tactics for detecting financial fraud:
2.1. Maintain AML/KYC Compliance
Anti-Money Laundering (AML) and Know Your Customer (KYC) compliance are essential for maintaining customer data and privacy. The financial entities should establish certain norms and regulations that involve the implementation of robust procedures to detect and prevent cyber security activities. As financial leaders and professionals, you can take proactive steps to safeguard both the company and its customers, like using multi-factor authentication, biometrics, and many more. Thus, you should update your company’s regulations and invest in advanced technologies for a high level of security and compliance.
2.2. Strict Customer Onboarding Process
The transformation from physical to digital onboarding has changed the customer’s onboarding experience. But in this process, financial institutions should ensure that they perform the necessary checks and balances, along with verification and record-keeping, to ensure system security.
2.3. Automated Transaction Monitoring and Screening
Customers’ behavioral patterns, like session times, transaction amounts, active times, etc., in the financial sector can be used as parameters to identify any suspicious activities. However, continuously monitoring each user’s activities makes automation a crucial part of this process. Thus, financial professionals can, with the help of the IT department, implement automated transaction monitoring and screening software or applications that reduce fraud and detect unusual activities.
3. Two Types of Fintech Fraud and Solutions to Protect Your Institutions
3.1. Payments Fraud
Automated Clearing House (ACH) is an affordable and convenient method for businesses to exchange money; however, with increased usage, ACH fraud has also increased. ACH attackers can easily gain access to bank accounts, which can be easily used to debit funds from customers’ accounts.
Solution: Plaid signal can predict the risks of ACH return in seconds using the risk-scoring model that is based on 60+ attributes like account balance, usage history, and number of connections. For financial professionals, using this platform makes it safer for financial institutions to track transactions.
3.2. Account Takeover
Account takeover (ATO) occurs when cyber criminals gain access to financial accounts using methods like a change in password, email, or credential. To commit such fraud, attacks use information, breach data, and then use credentials-stuffing software to gain access to customers’ financial accounts.
Solution: The easiest way to prevent ATO is to use unique passwords for each account, as studies found that using hard-to-guess passwords will reduce the chance of data theft by 15%. Additional protection is also available, which you can customize according to your customer’s preferences.
The digital transformation has taken a big leap in the past few years with the introduction of cashless and contactless payment, which was the need of the hour. The fintech innovations are improving customers’ experiences, gaining their trust, and satisfying them with excellent services. So combating all necessary fraud in the financial technology system is a must to gain confidence among customers.