Chaos often creates opportunity, and that’s exactly what fraudsters found in the recent banking crisis.
As the market destabilised, fraud attacks rose, leaving many people and businesses vulnerable to financial loss and reputational damage. An unstable financial market can cause panic-driven money movement, leaving cracks in security for fraudsters to exploit.
The banking crisis illustrates how fraud can hit quickly from any angle anywhere people or businesses move money. JP Morgan's 2023 AFPⓇ Payments Fraud and Control Survey, for instance, found 65% of the organisations in the research experienced payments fraud attacks in 2022.
There are, however, steps payment service providers can take to protect themselves and their customers from fraud. Here are three key strategies.
Adopt a risk-based approach to fraud prevention
A risk-based approach involves assessing the fraud threat a customer poses and taking steps to address it in real-time. The approach varies depending on the customer’s risk level and can include verifying personally identifiable information (PII), identity document verification, watchlist screening, and ongoing monitoring.
The first step for payment service providers is evaluating risk based on factors such as industry, country, customer base, product offerings, and transaction type, value, and volume. Payment service providers also can assess the risk posed by their business partners.
Fraudsters constantly change their attack vectors, so it’s important that payment service providers have the flexibility to adapt verification strategies to keep pace. A comprehensive strategy includes constant risk evaluation and optimisation of customer due diligence measures.
Organisations can ensure secure customer transactions and stay ahead of fraudsters by identifying risk and systematically minimising it.
Once a payment service provider establishes a risk strategy, digital identity verification takes centre stage.
In the fast-paced payments world, it’s essential to have efficient onboarding procedures that accept legitimate users while keeping bad actors at bay. However, the latest fraud advancements – including increasingly sophisticated synthetic fraud and identity theft – make it difficult to rely on a single verification technique.
Layering verification capabilities – PII data source matching waterfalling to identity document verification for high-risk scenarios, for instance – can create barriers for fraudsters and easy onboarding for real customers. A layered stack of verification techniques can be a critical tool in minimising fraudulent activity, protecting customers' sensitive information, and building a trusted reputation.
Risk management doesn’t stop after onboarding.
Payment service providers can reduce fraud risk by continuously reviewing customer accounts and transactions for anomalies and screening users against global watchlists and adverse media sources. That approach helps identify potential threats, exceeded transaction limits, shifting behaviour patterns, and other data points.
Payment service providers operate in an industry with stringent regulations, and regular account monitoring is essential to maintaining Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance.
Fraudsters are always looking to exploit an opportunity, and they move quickly when they find one. But flexible onboarding and monitoring strategies can keep payments companies one step ahead.
The goal is to ensure customer transactions are fast and secure, allowing for a positive, safe experience. By establishing fraud prevention measures across the entire customer journey, payment service providers can enhance trust, defend their business, and stay on the right side of KYC and AML regulations.
About Michael Ramsbacker
Michael has more than 20 years of experience in the strategic execution of product strategies, particularly for the business-to-business technology industry. At Trulioo, he oversees the launch of new digital identity verification solutions and services.
About Trulioo
Trulioo is dedicated to verifying the identity of anyone and any business. Its identity platform drives global growth for organisations by helping them navigate the challenges of compliance and providing real-time verification of more than 5 billion people and 300 million businesses worldwide. By leveraging world-class technology designed to make identity verification faster and more efficient, Trulioo is opening the door to the digital economy for everyone on the planet.
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