Fraud Prevention

5 Ways to Stop Online Banking and Finance Fraud

February 6, 20236 min Read

phishing detection

Online banking and finance businesses are reshaping the financial sector and improving the user experience for customers. Unfortunately, moving finance to the digital sphere also makes it easier for fraudsters to strike. In fact, fintechs such as neobanks seeing a fraud rate that is twice as high as the fraud rate for credit cards.  

In order to maintain strong reputations, protect client data, and avoid embarrassing and costly fallout from attacks, fintechs must work to keep out the online criminals seeking to exploit their technology for money laundering, identity theft, and fraud. Read on to learn more about fintech fraud detection, and how you can prepare to protect your business while realizing significant cost savings. 

Fintech Fraud

Fraud can impact fintech businesses of all kinds, including digital banks, payment processors, and crypto exchanges. The boom of fintechs poses challenges for regulators, and fintechs must establish anti-money laundering (AML) and know-your-customer (KYC) compliance practices to keep out the fraudsters that are staging increasingly sophisticated attacks. At the same time, they must maintain positive client experiences that are as convenient as today’s customers have come to expect.

Fintech fraud prevention isn’t easy. In order to stop fraud while maintaining a great service for legitimate users, access to reliable, trustworthy data is paramount. Download our eBook to learn more about the trends fueling account takeover attacks on fintechs and read on to find out about the types of attacks, and how you can prevent them.

Types of attacks on Fintechs

Here’s an overview of some of the most common types of attacks on fintechs: 

  1. Account takeover remains a huge challenge for digital businesses. Fraudsters might seek to drain money and rewards, or access saved passwords, jeopardizing business-customer relationships. 
  2. New account fraud is when a fraudster opens a line of credit or bank account using fake or stolen credentials, creating a huge inconvenience for both the financial institution and the individual whose details have been used.
  3. Micro-deposit fraud is a strategy that fraudsters use to steal tiny amounts of money at scale. This could be mere cents at a time, but it can soon add up to untold financial and reputational damage for fintechs.
  4. Application fraud is facilitated when fraudsters utilize stolen or synthetic identities to apply for credit, building banking behaviors that look authentic. Over time, they use this to access additional credit.
  5. Payment fraud might involve stealing the personal data of a genuine user. Once the cybercriminal has this in hand, they may use it to complete an unauthorized transaction, or initiate a fraudulent request for a refund. 

Fintech Fraud Prevention: 5 Important Steps

As risks balloon, it’s more important than ever to protect your fintech business from bad actors. By understanding the different components of a fraud prevention strategy, you can empower your team to identify fraud quickly and efficiently, before cybercriminals harm your business. 

Below are five ways that you can approach fintech fraud detection and prevention:

Customer Onboarding

Maintain robust KYC processes during digital client onboarding. Criminals often use stolen or synthetic information to commit fraud, so having an automated customer identification program can help fintechs to keep criminals out, while getting legitimate clients set up without delay.

Automated Monitoring & Screening

Diligence during initial onboarding is critical, but you’ll need to continue monitoring all transactions over time to assess evolving risks. As cybercriminals become more skilled at getting past anti-fraud solutions, it's crucial that fintechs and other businesses keep their defenses current and relevant. 

Machine Learning to Prioritize Alerts

Transaction monitoring is time-consuming for your fraud prevention team, and machine learning can help with spotting red flags. Once an unusual transaction that falls outside of expected customer behavior patterns is identified, your team can prioritize it, drilling down to assess if the activity is fraudulent. 

Real-Time Risk Classification

Acting fast is important when it comes to stopping fraud. Risk classification includes assessing the device ID and reputation, network & IP, user behavior analytics, and more. This allows your team to make real-time decisions to determine a risk score.

Enforcement Challenges

Some customers are riskier than others, and by using risk scoring, you can make the right decisions for your business. Accessibility of enforcement challenges should be key, providing a way to manage bots efficiently while offering human fraud challenges that keep usability for all genuine customers in mind.

With lots to think about when it comes to fraud prevention, you need a partner who can help you to stop cybercriminals before they cause financial and reputational damage to your business. Read on to learn why some fintech fraud detection solutions are dated, and how we can offer a better way to fight fraud.

Fintech Fraud: The Best Solution to Detect and Prevent It

Now that bots have advanced, human-like capabilities, traditional CAPTCHAs cannot always distinguish between genuine users and fraudulent, automated attacks. To make matters worse, they may also inadvertently block good users. 

A better strategy for fraud prevention is to adopt a zero-tolerance to fraud, which goes beyond fraud detection and focuses on fraud deterrence. At Arkose Labs, we help our customers to deter attacks by making it harder for fraudsters to attack and make profit. We work with fintechs to bankrupt the business of fraud by sabotaging attack attempts, making it uneconomical for attackers to target your business. 

Our platform empowers fintech fraud prevention teams to spot large-scale attack attempts and stop them in their tracks. With multi-faceted machine learning combined with 24/7 analysis from a Security Operations Center, we help teams to apply risk classifications to traffic in real-time. We focus on offering clear explanations and a path to remediate risk, while working to keep disruption for legitimate users to a minimum.  

More advantages of partnering with Arkose Labs to fight fraud include:

  • Guaranteed efficacy with our industry-first limited warranty
  • Privacy friendly technology that doesn’t compromise data protection compliance
  • Managed services for delivery of insights specific to your business 

With Arkose Labs, you’ll see results for your fintech fraud detection within days. Are you ready to fight fraud and keep your fintech business safe from attackers? Book a demo with us today.