How Fintech Innovation Beats Fraud

While fintech innovation continues to evolve, the threat of cybercrime is ever-evolving. It’s a problem in even the most secure corners of the internet. These crimes are more sophisticated than ever. And there is an increasing number of data breaches each year. These breaches make personal data like usernames, passwords, credit card information, and social security numbers, vulnerable to fraud. Criminals can use this information to drain bank accounts, illegally secure products, and services, initiate account takeovers, and perpetrate other types of fraud.

Moreover, it’s up to fintech companies to ensure that they know their customers and gather the regulatory information required as they onboard. They do this through secure verification methods. Fintech companies, as well as the established financial institutions who invest in and adopt these technologies, all have a serious responsibility to customers and to their companies to prevent fraud and ensure compliance. 

Fraud is a Growing Problem

Traditional authentication methods are no longer sufficient. With the internet and social media, it’s incredibly easy for criminals to guess passwords and bypass security questions. So companies have increasingly implemented advanced technologies to thwart cybercrime. But as the security measures become more sophisticated, so, too, do the cybercriminals. Cybercrime is on track to top $6 trillion in 2021, doubling in just six years. It’s a low-risk and high-yield enterprise for the criminals who perpetrate these crimes. That means that fintech companies have to stay ahead with innovative measures of protection.

The Advantages of Digital Onboarding

For fintechs and other companies in the digital ecosystem, this means secure digital onboarding processes. When done right, digital onboarding offers many advantages in addition to fraud prevention. 

For example, it:

• Allows customers to sign up for services when and where they choose.
• Helps to reduce fraud by facilitating a secure process of customer identification with Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance.
• Creates a fast, frictionless experience so that customers are less likely to abandon and go elsewhere.
• Reduces operating costs, freeing up critical resources for other value-added tasks.
• Minimizes errors and redundancies that plague manual processes.
• Improves the workflow and reduces the time and expense of customer acquisition.
• Facilitates scaling operations by reducing the dependency on physical locations.
• Ensures greater compliance to regulatory requirements, thereby reducing penalties and potential reputational damage.
• Helps differentiate the financial institution as an innovative and convenient solution.

Upping the Game with Fintech Innovation 

The best way to improve the customer onboarding process is for fintechs to ensure that they have a robust digital process in place. This provides the best experience for the customer and allows the company to minimize any losses. Following are some of the strategies that enhance digital onboarding.

• Ensure that the onboarding process is completely digital. This means that the customer should never need to visit a physical location. When customers start online and are required to finish the process elsewhere, they are likely to abandon it.
• Facilitate the onboarding process on mobile technologies. For some people, particularly younger generations, a phone or tablet is their only online device. Others simply prefer the ease and simplicity of a mobile. If they sit down at a desktop or even a laptop, you can lose a potential customer.
• Provide a superior user interface. It must be intuitive, easy to use, and free from clutter.
• Perform AML and KYC checks that are rigorous, yet easy for customers. This means that they enter the information once. Also, ensure that the data can be shared appropriately across the organization. 
• Allow customers to sign using an easy electronic solution. There should be no paper involved, nothing to wait for in the mail, or no reason to go to a branch.
• Put fraud prevention first. Use up-to-date verification methods.

Fintech Innovative Solutions That Minimize Fraud Loss

As noted, customers want to open an account online without ever having to enter the branch. This is a critical component of a good onboarding process. That’s all well and good. However, fintechs must still be able to deliver this seamless experience while maintaining the right level of security. This will protect the customer, the account, and the financial institution.

Older methods of digital identity verification, such as Knowledge-Based Authentication (KBA), no longer work. These rely heavily on information that is common or can be easily guessed. A more layered and sophisticated approach to digital identity verification is needed.

When fintechs select a third-party onboarding solution, they must ensure that they have effective security, fraud protection, data privacy, and compliance measures in place. They must be able to deploy these methods while still offering the customer a frictionless user experience. 

1. Artificial Intelligence and Machine Learning

The best digital onboarding processes deploy intelligent automation. For example, artificial intelligence is used increasingly to make decisions based on predicting human behavior. It can detect fraudulent transactions and facilitate compliance. It also includes machine learning, which is a part of AI. Machine learning differs from human decision-making, which, in the case of fraud prevention, is passive and reactionary. When something goes wrong, people make more rules. This process can be cumbersome and unreliable. On the other hand, ML uses data, including information received from other companies, to continuously improve its decisions. 

2. Digital Identity Verification

There are many types of fraud, including synthetic identity, third party, chargebacks, and account funding, with new categories added too frequently. To prevent fraud, online verification cannot rely on physical documents and personal information alone. Identity verification is increasingly sophisticated, based on biometrics, transaction history, and more. Digital KYC tools allow financial institutions to definitively identify customers based on biometrics, transaction history, historical records, and more. The latest technologies can even recognize risky devices and block suspicious users. 

Cybercriminals can commit fraud and takeover accounts using botnets and other malicious malware. Digital onboarding systems must detect whether or not the application is being made by an actual human. 

The Instnt Solution: Can Your Onboarding Process Do That?

Instnt Accept^TM provides a digital onboarding solution that you can have up and running in minutes, not months. It ends the reliance on manually-intensive processes, using AI and its patent-pending predictive analytics to provide a secure, convenient, and customer-friendly experience. 

Instnt Accept^TM reduces the number of customers who become frustrated during the onboarding process and simply give up. Banks typically reject up to 40% of good customers. With Instnt Accept^TM, you can decrease that number by as much as half. So if you're currently rejecting 2,000 customers a month, you’ll be able to add 1,000 new customers each month. 

But the best part is that Instnt indemnifies you against aggregate annual fraud loss of up to $100M.  You’ll give customers the superior service they expect, all while protecting their data and your financial institution against losses.

Instnt Accept^TM is a fully managed digital onboarding solution that can significantly improve your bottom line. If you’d like more information, contact Instnt today.