Nine out of ten fintechs plan to recruit more experts to help tackle fraud as they expect scams to soar in 2023, according to new research from OCR Labs Global and FINTRAIL.
The research, Fighting Identity Fraud in an Economic Downturn, shows that in 2022 fintech experienced a rise in third-party fraud, with 60% of respondents citing identity theft, account takeover and social engineering scams as the main types of fraud detected.
The survey received responses from more than 50 global members of FINTRAIL’s FinTech FinCrime Exchange, a global network of fintechs, to collaborate on best practices in financial crime risk management. The research looked to understand the impact of fighting identity fraud in the current economy, as well as the challenges and opportunities for fintechs to manage fraud volumes in 2023.
Amongst the survey’s findings, 81% of respondents expect to see a rise in all types of fraud in 2023, and, to address this challenge, nearly nine out of 10 (86%) fintechs are gearing up with fraud prevention and management headcount. To complement that, 42% are also looking into fraud prevention software, 40% into AI and machine learning solutions and 38% into digital identity verification (IDV) software.
“Our research shows that the main challenge fintechs have with addressing this is the length of time spent reviewing cases,” says Russ Cohn, general manager at OCR Labs Global.
“We are seeing an increase in very convincing AI-generated deepfakes. These synthetic media would fool almost any human, and our research shows that 2 in 3 fintechs planning to add new automated identity verification technology that can detect true human liveness,” he says.
“Investing in technology that keeps our customers safe is always our top priority. Fintechs that have sound business models and execution will grow, despite hard economic downturns,” says Cohn.
“Unfortunately, growth and success attract fraudsters. That is why we continue to hire and strengthen our trust and safety capabilities.”
Shay Oshinusi, Financial Crime Operations Unit Lead at Mettle, says, “It is important to be able to react quickly when fraud comes in. But being able to get the buy-in of all the relevant stakeholders in order to make that happen, and make that happen quickly, can be a challenge.
“We want to strike a really good balance between people versus tooling. The best solution isn’t always to only throw people at a problem its about looking at how we can gain efficiency using fraud prevention software,” says Oshinusi.
“With the Bank of England forecasting that the recession is likely to last until well into 2024, now is a good time for fintechs to think about future-proofing.”
“The 2008 recession showed fraud rates rising as people found themselves under increasing financial pressure. Fraud prevention measures that worked then wont be fit for purpose now, as fraud techniques have evolved. Fintech companies need to evaluate their technology stack to ensure they do not fall victim to third-party fraud across the board.”