TMT Analysis held a virtual roundtable recently on how to tackle mobile fraud. Around the table were notable members of the fintech and fraud industry from Europe and the US. Below, Fergal Parkinson explains some of the key points raised and what the future looks like for those combating mobile fraud in a mobile-first world.
2020 was one of the most challenging years in the industry as the financial services (FS) sector felt the economic impact of the coronavirus pandemic, yet it has also provided significant opportunities too.
COVID-19 has exponentially increased smartphone usage and with that, customer engagement, as people use their phones for payments and transactions. Combine this with mobile technology rapidly improving in recent years and fintechs have been able to onboard a greater number of customers and at a quicker rate.
But for all the potential benefits, there will always be inherent risks. Let’s take mobile fraud, which hinders business growth and trust in the market. A problem that will develop and thrive in 2021 unless we tackle it head on.
What’s fraud got to do with it?
Mobile numbers have become one of the most important means of identifying customers and with that the numbers and associated SIM information have become even higher prized targets for fraudsters.
For example, according to Action Fraud, sim-swap fraud, where a criminal tricks a mobile network into transferring a customer’s phone number to a Sim card in the criminal’s possession have rocketed by 400% over the past five years.
At a recent virtual roundtable we held, discussing the issues of fraud and fraud prevention, Cifas – the world’s largest cross-sector fraud sharing organisation – explained that they had seen an increase of 34% yoy in facility takeovers, meaning even more fraudsters are gaining access to a customer’s account for their own benefit.
It doesn’t stop there, Kalgera noted that social engineering scams targeting vulnerable people have been on the rise during the pandemic, especially as they do not have that needed support either from families or friends.
The issue is compounded by the fact that over the years we have grown accustomed to social networking and email technologies that are essentially anon-friendly and profoundly non-secure. With that expectancy lies a deep-rooted problem for future generations, an educational exercise for consumers. Ultimately, fintechs will constantly battle the need for convenience (low-friction) versus security but there is certainly room for optimism.
Collaboration is critical
It’s clear that partnerships have a major effect on the ability for fraudsters to interfere and interrupt with our lives; the responsibility cannot just lie with the commercial players within the industry. For example, One World Identity, which is a research and advisory firm focusing on identity, believes that the collaboration between private and public sector has helped, such as that shown in Singapore, the Nordics or Canada, with institutions making a certified effort – like “Verified Me” – to bring telcos, banks and governments together.
Some of the issues will take time to solve, in particular in Europe, where the application of know your customer (KYC) and anti-money laundering (AML) policies need greater standardisation and harmonisation – Hubuc noted this at the roundtable and said they had seen complexity dealing with local rules issuing cards and opening bank accounts.
This is a point that was echoed in our roundtable by Otomo, who rightly stated that even more collaboration is necessary if we want to advance as quickly as we need to.
Regulation has had an increasing impact on the world of mobile security and ID verification too. There are important aspects around privacy and the General Data Protection Regulation (GDPR) where businesses have to filter through their customer relationship management (CRM) cyclically, to check customers are still active and their credentials are right.
What are the solutions?
As we head into 2021, it’s clear that there needs to be more rigid checks on the validity of the number and the SIM. Fractal Labs reminded everyone at the roundtable of the application of the Second Payment Services Directive (PSD2) and the Strong Customer Authentication (SCA) requirement, highlighting the future of biometric data providing greater security too.
Naturally, data plays a major role in this. There’s opportunity for in-life management of customers around cyclical checks, but also around lean or dramatic spikes in behavioural change. That data, constantly moving, being shared, providing the resource to profile what an individual customer looks like to a business, can be a very powerful tool.
Open Banking, as an example, has truly forged a way forward like no other. Though we have had greater challenges in the FS industry – whether it be compliance or the need to adjust due to issues around security and customer authenticity – we are seeing positive effects of these challenges in the form of innovation and new entrants into the market.
Ultimately, it is promising future for fintechs. Unlike older institutions, fintechs have the ability to be agile and on the front-foot with mobile-first technology. Whether through collaboration or not, there has been great resilience through necessity as people look to scale businesses within the FS industry. Mobile intelligence is intrinsic to the role in reducing the risk to organisations and will help those who look to win the battle of convenience versus security. We should look forward to 2021 as it hold great promise for the most adaptable and innovative within the industry.