Fraud in Fintech: How to Detect and Prevent?

The fintech industry is evolving with every passing day. This industry has shown splendid growth using artificial intelligence and machine learning approaches. With monitored financial transactions online, fintech advancements have risen to new heights. This has led to an increase in businesses with online financial transactions. But there has observed an alarming increase in online fraud proving to be a breakneck for businesses involving online transactions. Fraudsters are also enhancing their strategies in committing frauds and scams for financial gains. In this article, we’ll discuss some common fintech frauds and how to prevent them.

List of Fintech Frauds

Some most common fintech frauds are phishing or spoofing, identity fraud, account fraud, transaction fraud, well the list goes on. Here is the how you can stay a step ahead of these:

• Spoofing or Phishing Attacks

Spoofing or phishing is the malicious activity to get access to a victim’s personal information or an organization’s computer networks. This can cause victims to lose important personal information and for organizations, it is an opportunity for cyber-attacks and network infections. Such scams can give access to all your accounts to scammers and this results in other frauds.

• Synthetic Identity Fraud

Synthetic identity fraud is when a scammer creates new identities by combining fake data with stolen original data. Scammers steal data from different sources like documents, IDs cards, phone numbers, social media accounts, etc. They incorporate this stolen information with fake data. This gives rise to a new fake data which shows no identifiable victim. The identity thief often remains undetected and a continuous threat to business organizations.

• Account Takeover Frauds

Account frauds are another type of rising fraud in the fintech world. To loot large amounts of money from banks, scammers use this technique. They then disappear after stealing the money. This type of scammer usually has a good credit score and then at once takes large amounts of loans and disappears which usually leads to bad debts and losses for the lending company.

• Transaction Fraud

Transaction fraud is a dangerous type of fraud that can cause hefty losses to the business. In this scammers use stolen credit cards or identities to make large purchases. It gives very little time for the business to verify the authenticity of the user. The fraud is only detected when the victim reports the loss of money in their account and the company ends up paying the compensation to the victim, the scammer usually going undetected.

How To Prevent Frauds?

Scammers commit such fraud by applying for loans. When the businesses somehow lend the loans, it turns out that they have been scammed. This is usually done by using various APIs to look up the customer’s history of relationships with banks. The other way to detect and prevent fraud is by identifying high-risk customers by using digital identity verification solutions. This way is economical as it cuts the cost required for manual identification. This type of advanced digital solutions has proven to reduce fraud by a large extent.