How FinTechs Are Fighting Identity Theft and Identity Fraud

Among all the suspicious activity that financial institutions (FIs) encounter, 42% relate to identity. With dark web ID data dumps and artificial intelligence (AI) tools available for bad actors, these schemes may become easier to execute. This could be especially true regarding fraud against digital-first entities such as FinTechs. This component is just one of the escalating levels of concern among FinTechs and the consumers who use them. How can FinTechs address the growth of fraud and meet the demands of their ecosystem while safeguarding customers’ finances?

“How FinTechs Are Fighting Identity Theft and Identity Fraud” is the third edition of the Identity Verification Series, a collaboration between PYMNTS Intelligence and Intellicheck. It explores fraud and verification issues in the FinTech industry and details current and future technologies and legislation surrounding fraud prevention.

Fraud Concerns

FinTechs are a fraud target, with automated systems and financial transactions on the line.

When splitting a bill or making a quick digital payment, consumers expect their FinTech-operated systems to be friction-free. But no transactions escape the watchful eyes of fraudsters. FinTechs’ automated systems and connections to transactions, such as peer-to-peer (P2P) payments, render the industry a keen target. Roughly one-third of FinTechs report recently experiencing fraud, which has trended up in the financial industry. In the United States, FIs witnessed fraud losses increase by approximately 65%, rising to an average of $3.8 million lost last year.

Further, bad actors are increasing their sophistication. The difference between fraud attempts and regular transactions can be very difficult to observe. In many cases, this is how fraudsters attack. Authorized fraud (when an individual initiates a payment to a fraudster) makes up 46% of fraud among FIs with assets of more than $100 billion.

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