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6 steps to fight digital fraud in the New Year from Mitek



Anyone can be a victim of fraud.

The surge in online banking has brought great convenience and speed to consumers but has opened them up to more opportunities to be defrauded in the process. From identity theft and imposter scams to phishing and laundering schemes, we must now be on constant alert to protect our finances.

Fraud is estimated to cost UK society around $5.3 billion each year and in 2021 alone, Americans lost $5.8 billion to identity theft. In the current climate with the cost-of-living crisis and a looming global recession, it has never been so important to protect consumers and companies from fraudsters.

As part of these efforts, executives at Mitek have provided these important steps that businesses should follow in the new year to keep their customers safe.

Understand the impact on the customer – By: Cindy White, CMO 

It can be easy to forget that each statistic is made from individual victims whose lives have been turned upside down by fraud. Gaining a proper understanding of the issues and their impact on your customers is vital to build a robust plan of action.

According to the 2021 Aftermath Study from the Identity Theft Resource Centre, the impacts on victims are severe.  Almost a third (32%) of victims experienced finance-related issues. All of these were contacted by debt collectors, often aggressively, and 83% were turned down for credit or loans – which left many unable to rent an apartment or find housing. In some cases, victims can even turn to criminal activity themselves to stay afloat, exacerbating the issue. Understanding the severity of the impacts on customers provides a good base to act.

Reduce reliance on passwords – By: Mariona Campmany, Digital Identity Lead 

Passwords are becoming redundant. Many, if not most, organisations will move away from passwords in the near future, and it is no longer a question of if, but when businesses will reduce their reliance on passwords in favour of new technologies like biometrics.

Passwords are a nuisance to the user and are not an extremely secure option on their own. They have always been used to access an online account, but increasingly are being used as proof of identity, for example when signing a document or making a transaction. In this case, a misuse of that password means that someone can legally sign in your name. Even one-time passwords (OTP) as part of multi-factor authentication (MFA) can be vulnerable, with scammers pressuring victims for codes and SIM swapping attacks.

 The move to biometrics – By: Steve Ritter, CTO 

If a cybercriminal obtained a password fraudulently, they had a clear path to steal information or money. Removing this reliance on passwords and still providing the ease of use, speed, and accessible interface that customers demand can be tricky. Going passwordless requires businesses to find the right balance between good security and good user experience – and this is where biometrics come in.

Passwordless authentication based on multi-modal biometrics is the best alternative. Authentication will rely less and less on something you can share by accident or forget, and more on something easy to prove and inimitable. As well as providing higher levels of security, biometrics also improve user experience, with 70% of consumers believing that biometrics are easier and 46% thinking that they are more secure than using passwords or PINs.

Forged identity documents and synthetic identities are also becoming increasingly common; however it is very difficult to steal a verifiable biometric that meets common standards of liveness and authenticity. Multi-modal biometrics prove more secure and more reliable than any other type of identification available in the market today.

Be transparent – By: Chris Briggs, Head of Digital Identity 

The first step in making biometrics adoption comfortable for consumers is data transparency. Organisations must be clear on what customer data is being gathered and how it will be used. In addition, they need to provide a method for expressing consent of the use of that biometric, and the right to withdraw that consent at any point in the future.

In Mitek’s recent Reddit AMA, we learned that consumers have little confidence that the government, private businesses, AI, or even friends, are using biometrics appropriately. The trick to closing this trust and confidence gap comes from helping consumers understand their rights – especially those that come from emerging personal information and biometric regulations like the AI Bill of Rights.

With this knowledge, and clear notification from a trusted service provider, consumers can feel confident entrusting their digital security to biometric based authentication solutions. Ultimately, it is the consumer’s choice to use biometrics and they need to be well informed to make the right decision.

Boost customer knowledge of biometrics and identity protection – By: Steve Ritter, CTO 

Consumers need to feel confident that biometric authentication does not mean biometric surveillance. It is up to industry leaders and businesses to educate consumers on the difference. After all, businesses must be the first line of defence to protect customers from digital fraud.

Today, the use of biometrics on mobile devices is a process that avoids the hassles of missing coverage, attempted fraud, or remembering passwords, and the consumer uses unique and non-transferable values. Once the person is aware of this, security is guaranteed along with a great user experience. By creating an intuitive, safe, easy to understand, and well-protected biometrics, consumers will want to use them as a better alternative to passwords.

Businesses should also provide consumers with education on how to protect their information and identity online, to further boost their security. Tips like making your home network more secure with strong passwords and encryption, shutting down or locking your work computer when you aren’t around and being careful about clicking hyperlinks in emails are just some easy wins that businesses should share with their customers.

Educate consumers on fraudulent schemes – By: Sanjay Gupta, SVP and MD 

As well as educating consumers on how they can protect their identity and use biometrics for extra security, it is vital that businesses share information on fraudulent schemes that could be a threat.

For example, vishing, or voice phishing, scams are on the rise, where fraudsters use voice calls to steal information or convince the consumer to allow them access to their funds. They impersonate banks or governmental organisations, holding just enough personal information about the consumer to convince them that there is something wrong with their account, and dupe them into providing account information.

Fraudsters also use consumer information for account takeover (ATO) schemes. They call support centres, pretending to be the customer to try and take over the account. However, in these cases, if the consumer had voice biometrics set up then they could thwart this type of attack.

Remember that fraudsters never stop looking for ways to adopt new technologies and use them to their illicit advantage. Businesses need to keep this in mind when planning their defences and help their customers protect their identity and data. Moving to a biometric-first strategy and educating customers on the benefits of this will be the best way to protect them from fraud.


Shutting off mule accounts to effectively tackle APP fraud




Cleber Martins, Head of Fraud Management for Banking at ACI Worldwide


Authorised Push Payment (APP) fraud is on the rise. Losses from this type of fraud are expected to record an average CAGR of 21% from 2021-26 in the UK, US and India. To combat this rising threat, late last year the Payment Systems Regulator (PSR) published new rules for banks and building societies regarding the reporting of APP fraud.

While losses won’t keep pace with the overall growth of real-time payments, banks shouldn’t be complacent regarding the risks. And though it’s true real-time payment channels have created a reality where fraudsters can succeed faster, it is mule accounts that allow them to keep getting away with it.

Fraudsters recruit mule accounts often through identity theft, turning a user’s account into a mule account without their knowledge, or by recruiting and targeting more vulnerable people on social media and other online communication channels. Thereby enabling criminals to hide their identity and quickly move stolen funds beyond the reach of banks and authorities, either through other mule accounts at different banks, or by buying crypto or NFTs. This is why, in order to effectively tackle APP fraud, banks need to shut off these mule accounts once and for all.

Banks battling back

Currently, most banks only tend to check outgoing transactions. This means that when a mule account suddenly receives money from numerous different accounts, following little to no activity, it’s usually not picked up. And this needs to change.

Cleber Martins

When battling back on scams, banks need to have the appropriate Know Your Customer (KYC) standards. Thus allowing them to monitor the money coming in as well as out of customers’ accounts and analyse the user behaviour of those accounts. This all helps banks to monitor for synthetic and stolen identities in relation to the money coming into accounts.

Being able to monitor and analyse all the data in real-time requires machine learning algorithms with rich contextual information. Put simply, these models are only as good as the signals and inputs they have been given. This means the more financial institutions – on both the sending and receiving end of the transaction – collaborate on signal sharing, the better they can target mule accounts. Additionally, more data and more accuracy should also lead to a decrease in the number of false positives and an improved user experience for legitimate customers.

To effectively shut off the supply of mule accounts, better collaboration and data sharing between banks and financial institutions are needed and with the introduction of the new PSR rules, we could see this quickly come to life.

Why receiving banks must be held accountable

There’s currently almost no risk at all for receiving fraudulent transactions into mule accounts, despite hosting the mule accounts used by fraudsters to receive stolen funds. This results in most banks doing little to no monitoring or analysis of the money coming into accounts. And little to no meaningful intelligence being exchanged between the two ends of a transaction. To turn the tide on scammers, this needs to change.

The Payment Systems Regulator (PSR) has said that in addition to putting mandatory reimbursement for most victims of APP scams, liability should be split equally between initiating and receiving banks. Unless the receiving bank can prove it has gone to greater lengths to do it’s checks, in comparison to the initiating bank, resulting in the initiating bank being held more financially liable.

This should incentivise a major shift in how banks monitor fraud activity, by increasing how they monitor the money coming in, in combination with behavioural profiling of the receiving accounts. Ideally, once the two sides of a transaction are working together, a “fraud DNA” can be constructed to enable more precise decision making. One strand of that DNA, in practice, would be the initiating end’s sending an intent for a real-time payment, including intelligence about the initiating account in metadata format. The receiving end would then correlate that with their own, thereby adding the second strand of intelligence to the DNA chain. Finally, a decision would be made as to whether to allow the transaction to be completed.

This increase in collaboration between banks, would symbolise the first step of building a framework that promotes the sharing of insights and could mean the end of mule accounts as reliable tools for fraudsters.

What future collaboration might look like

While banks play an important role, mule accounts are often created on social media, through the telecom industry, via email or even postal mail. Making APP fraud a cross-industry problem. This requires a next-level, cross-industry collaboration strategy, that sees solutions, techniques and intelligence being shared between banks and vendors, merchants, issuers and acquirers, and even with social media companies and telcos.

Ultimately, it’s about ensuring customers are better educated and protected and that banks perfect their monitoring of the money that comes in, as well as out, all while sharing that information. Building a true cross-industry framework will help deprive scammers of access to one of their main conditions for growth. As a result, we should begin to see the value of APP scam losses, as a proportion of the value of real-time transactions, drop.

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Demonstrating fintech resilience in 2023




Melba Montague, Head of Financial Services, Genpact 


Despite ongoing economic turmoil and a slowdown in investment, the UK has managed to retain the top spot as Europe’s financial centre, and London, as the Silicon Valley for fintechs. While 2023 looks uncertain still, fintechs are known for swift innovation and reinvention. UK fintechs in particular, will ride this wave, capitalising on the $28.2 million in capital invested in the industry in H2 2022.

However, the fintechs that come out on top will be those that focus on, and demonstrate to investors, one word: resilience.

To do this fintechs must remain laser-focused on operational basics to prove their worth. This is even more vital as the world watched the collapse of cryptocurrency exchange FTX and lender BlockFi in 2022. And with growing industry concerns around alternative finance, there is also no doubt that regulatory complexities will increase in the coming year, especially with a greater presence of Buy Now, Pay Later (BNPL) products on the market.

Access to capital will diminish sooner than you think

According to the latest Innovate Finance report, global fintech investment reached £75.6bn ($92bn) in 2022, a decrease of 30% from the previous year. The drop is the result of the macroeconomic and geopolitical disruption, but despite this, the UK fintech industry received £10.5bn ($12.5bn) in investment – only an 8% drop from a record-high 2021. This demonstrates great resilience in this space. Further, the report shows that the UK is still receiving more fintech investment than all the next 10 European countries combined and remains second in the world only to the US.

That said, for rapidly evolving fintechs looking to continue their scaling journeys across the UK and beyond, access to capital and a global slowdown in venture capital (VC) investment will test their durability in the market. Even as the cost-of-living crisis drives demand, inflation has hit BNPL companies, bringing down valuation as Klarna announced that it had closed its major financing round with an 85% decrease of its valuation, down to $6.5bn in the latter half of 2022.

This year, investors will want to see fintechs lower their reputational risks, follow regulatory advice to maintain compliance, keep customers well-protected, and make use of innovative technology to accelerate and scale their processes.

Regulatory complexities will increase

While the UK government cultivates a strong culture of innovation and boasts a strong reputation for financial services, it needs to be more proactive in its regulatory stance. This is especially true for areas of alternative finance, such as BNPL.

BNPL’s resurgence in recent years has made it an attractive alternative to traditional spending, but not without major risks. At present, BNPL is an unregulated, decentralised industry, and presents major risk to consumers borrowing beyond their means without adequate financial advice or safety nets. Arguably, BNPL has made it easier to create debt, with figures showing that 4 in 10 people will even use additional lending to pay off their BNPL debts.

With urgent calls for the FCA to advocate for new government regulations from the UK Treasury and consumer champions alike, this will begin to establish concrete guardrails for both fintechs and for shoppers looking to manage their finances. While waiting, providers must step up and protect customers as more structured regulatory models are finalised.

BNPL providers have also made growth commitments to investors. They will be expected to keep those promises this year, as well as maintain operational stability, all the while customer experience is not adversely impacted. It will be crucial for fintechs to take the high ground and look for innovative ways to both educate and protect their customers whilst preparing for regulations recommended by the FCA come into play this year.

Resilience will be critical

The FCA is expected to introduce new requirements to perform credit checks this year, fintechs, neo banks, and BNPL companies now hold a greater responsibility to identify those at risk and support them with appropriate measures.

This presents growing opportunity for fintechs to promote financial resilience to improve their valued customers’ financial health. For example, with open banking-enabled solutions, they can provide insight to customers looking to monitor and consolidate spending.

As the industry awaits these incoming regulations, the onus will remain with fintechs to ensure their products are not at risk of endangering consumer debts. As such, it is critical that a proactive approach to educate the consumer is taken to avoid exacerbating an already fragile cost-of-living crisis. This could be done in many ways, from improving financial education in schools and boosting financial literacy across the board, to turning the onus of accessibility on banks to ensure that customers can receive tailored, personal support and counsel on their finances.

BNPL providers must also ensure their collection process engages empathetically with its customers navigating through financial hardship. Providers should leverage data-driven insights and segmentation from data, technology, and AI (artificial intelligence) to align with BNPL users’ specific communication preferences and chosen payment methods.

In addition, machine learning, AI, and automation of complex manual processes will enable secure operations with consistent quality and controls, while finding new ways to pre-empt risk and meet compliance and reporting obligations.

Persevering in today’s financial landscape

Not only do fintechs need to demonstrate resilience to their investors this year, but they must encourage and enable financial resilience amongst their customers. Fintechs participating in BNPL schemes must be made aware of the potential pitfalls that come with unregulated short-term lending, as practice shows that it increases individual risk as consumers borrow beyond their means without sufficient financial advice and regulation.

Implementing advanced technologies, such as AI/ML and data analysis into fintech operations also improves efficiency, enhances the user experience, and saves cost, particularly vital during a time when companies are confronted with record-high inflation and a volatile stock market.

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