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Digitization in the fintech industry is giving rise to financial fraud. It is essential to detect potential frauds and prevent them before any loss to the customer or the organization.
Fremont, CA: Like all the industries, the Fintech industry is experiencing a digital transformation. Customers now don't go to the bank physically to operate their bank accounts or withdraw money. All the banks now provide online banking services. But with the increase in digital transformation, the number of frauds in the financial industry has also soared. The financial sector is globally connected, and cybercriminals have access to all the technologies that the bank and customers use, making it challenging to track fraudsters.
Four ways fintech firms can prevent and detect frauds:
Bank Statement Analysis
Banks go through the bank statements of the potential borrowers to understand the customer’s financial behavior. Before digitizing processes, banks had to employ a large number of employees to analyze a customer's transactions. Manual analysis of bank statements is a very time-consuming and tiring process. It is also prone to human errors. This is why automated bank statement analyzers are now being used in the financial industry.
Multi-factor authentication and biometrics
Banks now have multiple operating channels, and a simple ID and password cannot be used as an authentication technique. With crimes increasing every day, unethical use of debit and credit cards has become common. Almost all payment systems provide additional authentication through a one-time password (OTP) for card transactions. But it is not a guaranteed safety option if the phone gets stolen. Digital payments are changing the game as they allow cardless transactions. Digital payment systems also use biometrics to authenticate transactions.
Fintech firms use AI and ML-based products to monitor customer's transactional behaviors with the help of computer algorithms. If the system finds an unusual transaction, it will notify the concerned authorities and authorize the transaction after customer authentication.
Building firewalls to prevent phishing and other attacks
Cybercriminals often use phishing attacks to steal the financial information of customers for monetary gains. Fintech firms should build an advanced firewall to scan mails and messages to alert the customers when they click on a spam or fraud link. This will help customers and financial firms to prevent any potential fraud.