By Nadav Naaman, Chief Product Officer at PayU
Payment threats in the fintech space have increased in parity with the adoption of new financial products and services, as more shoppers have transacted online since the start of the pandemic. Over the past two years, technological innovation in the sector has accelerated, better catering to the unserved and underserved consumers in emerging markets and allowing more shoppers to access merchants that moved online. However, with customers giving their financial data to merchants, a growing number of sophisticated scams have emerged, taking advantage of naive shoppers that may not be as clued up on the payment threats that exist. Additionally, merchants are also struggling to keep up with the emergence of new scams, and it is becoming increasingly important for payment platforms to innovate to overcome these threats. Fortunately, cybersecurity developments are improving the payments space, and in this article I will outline how these developments are allowing merchants and fintechs to stay one step ahead of new and emerging payment threats.
The Rise of Cutting Edge Fraud Prevention Technology
As the pandemic popularised e-commerce, we’ve seen a corresponding growth in cyberattacks, as cyber-criminals become increasingly savvy. Research has estimated that the value of money stolen via payment fraud will exceed $40 billion by 2027, marking a 25% increase in the total value of money stolen in 2020. With scams growing in complexity, more merchants are looking to partner with payment companies that deploy facial recognition and identity verification technology to counter this type of crime. At PayU we are always looking for new and innovative ways that we can mitigate against payment fraud. Last year, we partnered with identity verification company AU10TIX, to integrate its facial recognition technology to verify the identities of customers and new merchants. Deploying such technology has enabled us to counter the growing threat of fake identification documents that criminals are using to scam merchants and payment platforms.
Integrating facial recognition technology has enabled us to identify potential criminal actors in a matter of seconds, lowering the rate of payment fraud across our platform. It is now much harder for cyber-criminals to operate, but we know the battle won’t end there. Unfortunately, criminals will continue to develop sophisticated scams to now overcome facial recognition. That’s why the best payment providers are those constantly looking at how they can stay one step ahead of the criminals, by investing in the latest technology and putting cybersecurity front and centre.
Cybersecurity Driven by Data Empowered Merchants
While developments such as PSD2 in Europe have helped to optimise authentication it’s important that we see, among other measures, better merchant education being deployed to prevent further increases in payment fraud. For example, phishing scams have grown exponentially since the start of the pandemic with research finding that 90% of ransomware attacks are delivered by email phishing, and 85% of phishing attempts go after user credentials. Merchants must have access to initiatives that precisely examine the risks associated with sending email links to customers, and must also monitor interactions to infer trends with a particular user ID. This can be achieved by analysing customer behaviour through data and analytics with AI-powered solutions, which will allow merchants to instantly identify suspicious transactions.
Looking beyond the merchants though, banks and fintechs need to play their role, in part by applying behavioural metrics and analytics with continuous monitoring to detect payment fraud and identity theft. Merchants must also be able to authenticate transactions across consumers, banks and other third-party payment providers efficiently and with ease. This year, we will see the fintech sector focus on simplifying security through holistic solutions that streamline the authentication process. This may include contactless or password-less solutions that utilise biometric authentication methods, which is proving to be another effective way that fintechs and merchants can counter new payment threats and stay ahead of the curve.
Crowdsourcing Cybersecurity Efforts
One of the greatest challenges in innovating for business security is oversight of the new types of fraud being committed. An innovation that we’re seeing become more common is enabling customers to flag illicit activity to the payments provider via the merchant. Once identified, fraud teams will investigate immediately and implement the necessary response. Collaboration is key to overcoming payment threats, and network intelligence that utilises a hybrid-type Machine Learning approach, can prove to be invaluable in keeping ahead of emerging payment threats. Successful integration of machine learning can allow fintechs to maintain strong custom-type signals, in addition to flags from users and from third-party fraud intelligence sources. This method of eliminating risk is crucial to catching illicit activity that happens outside of current parameters and drives innovation in developing new technologies to address these more creative fraudsters and stay ahead of them.
As new payment threats emerge it is vital that merchants and payment platforms continue to innovate to protect customers. Whether it’s integrating facial recognition technology, ensuring that customers and merchants are educated and informed, or tracking suspicious activity, the cyber threat landscape is constantly evolving and becoming more advanced. As a result, payments industry leaders must continue to be on the cusp of the latest technology and trends to ensure they (and their customers) are always one step ahead of cyber-criminals.
