Fintech's losses soar 65% in the face of escalating fraud
With the rise of proxy AI, authentication is more important than ever.
Distinguishing legitimate transactions from increasingly complex fraud attempts, bringing fintech companies to digital-first infrastructure and seamless consumer experiences is the vanguard in the ongoing battle against identity theft and financial fraud.
PYMNT Intelligence Report: “How FinTech can combat identity theft and identity fraud,” reveals the challenges facing digital financial entities in combating fraud. The scope of the problem is very large: Of all the suspicious activities encountered by financial institutions (FIS), 42% are related to identity fraud. Dark Network ID data dumps and advanced artificial intelligence (AI) tools provide illegal actors with a way to plan.
- About one-third of fintech reports have recently experienced fraud, reflecting a broader uptrend in the financial industry, with U.S. financial institutions witnessing an increase in fraud losses by about 65% and an average loss of $3.8 million last year.
- Authorized fraud, where a person unconsciously pays fraudsters, accounts for 46% of fraud in financial institutions with assets of more than $100 billion.
- The losses of humans and finance to consumers are huge, with one in five using the P2P platform and losing financial exploitation reports, reporting losses of more than $5,000.
The battle is taking place across the digital front, with 75% of fraud attempts taking place through online and mobile banking channels, while traditional human touchpoints account for only a quarter of such attempts.
The consequences of successful fraud exceed financial losses, as 80% of financial fraud victims report dealing with stress, anxiety and psychological distress due to uncertainty in recovering their funds.
Adhering to evolving regulatory changes has created a huge challenge for most fintechs. 93% of fintech find it difficult to comply with regulations, while 55% specifically believe that insufficient automation of compliance is a critical barrier to meeting regulatory requirements, such as the Bank Secrecy Act.
To cope with this growing pressure, the FinTech team is examining new solutions to put them into its anti-fraud arsenal.
We found that 52% of financial institutions plan to allocate funds for third-party solutions to combat fraud. Mid-Market Fintechs hopes to invest in anti-SCAM educational tools (81%), document verification software (65%) and identity risk solutions (55%).
Innovative solutions have emerged, such as fortress payments leveraging self-photo biometrics and LINIVICE detection, Tiller Technologies simplifies getting started with digital authentication, and partnering with FINTECH360 with FUGU to deploy AI-drien-driven transaction monitoring and pattern analysis to deal with various frauds.
These investments in advanced authentication systems and new technologies will be an important part of the fintech industry’s efforts to protect itself and protect consumer finances.
