According to Capgemini’s World Payments Report 2019, by 2022 the world would have seen a double-digit growth of digital payments. CredoLab’s senior vice president and head of global sales, Tarun Kumar Kalra, says, “Worryingly, the escalation of financial crime is not far behind. Rapid expansion of digital channels, exploding growth in the number and types of devices, and reduced customer face time are making mainstream financial service providers and newer fintech companies vulnerable to online fraudulent activities.
Kalra was speaking upon his arrival in Cape Town this morning where he will finalise strategic partnerships and client agreements with key institutions in South Africa.
“Fraud is going mobile, mirroring consumer behaviour,” says Kalra. “We needed to better understand financial crime which is why we joined forces with iovation to produce the iovation Financial Services Fraud and Consumer Trust Report 2019.”
Interviews were conducted with 5.9 billion financial services providers and 1,604 consumers in the US and the UK to produce the report. The report revealed that between 2015 and 2018 there was a 575% increase in online identity fraud. As mobile quickly surpassed desktop during this period, nearly half of all these risky transactions stemmed from mobile devices. In the first half of 2019, 50% of all risky transactions originated from mobile devices.
“Through our interactions with financial services companies and other lenders in South Africa, we have quickly assessed that the problem here and in the African continent is as threatening as in other parts of the world,” says Kalra. “The South African Banking Risk Information Centre (SABRIC) reported recently that the country currently has the third-highest number of cybercrime victims worldwide and loses an estimated R2.2bn a year to cyber-attacks.”
Kalra explains that, “Tackling this issue is extremely complex. Overly aggressive fraud detection mechanisms can harm the customer experience by slowing transaction speed, requiring customers to perform too many steps before checkout, or worse, flagging good consumers as fraudsters or suspicious. After all, our business was established to bring more people into the mainstream economy through easier access to financial services and to credit.”
Banks and financial service providers need to confront financial fraud with the same levels of sophistication as today’s criminals. They need fraud prevention tools that are real-time and accurate, and in 2020, Artificial Intelligence (AI) and Machine Learning (ML) based solutions are central to achieving this.
“We have had to be infinitely smarter than hardened criminals while matching the rapid pace of digital change. AI and ML concepts are now familiar to most banks and financial institutions, but they need to go beyond traditional approaches to equal the rate and sophistication of financial crime. Conventional AI approaches that rely on rules and predictive models are no longer enough. Accurate information must be generated in milliseconds to combat the issue in real time.”
Through CredoLab’s partnership with iovation, a single solution using a global device intelligence network encompassing smartphone device metadata has been created for financial services providers. As consumers increasingly leave their digital footprint in the mobile world, smartphone metadata has emerged as a powerful tool in fraud detection.
“We are helping companies detect suspicious activities by scanning through huge volumes of external and internal data. We use device recognition and intelligence technology to detect different types of frauds using indicators such as geolocation, anomalies, device-usage patterns and other indicators to analyse customer profiles, behaviour and intent,” he says.
KPMG recently reported that fraud costs are increasing at a faster rate than fraud risk management spend, while the World Economic Forum’s Global Risks Report 2019, cites technological instability as a major risk with data fraud and theft now ranked the number-four global risk and cyber-attacks coming in at number five.
“We started out as a fintech company in 2016, at a time when cybercrime started coming to the fore,” says Kalra. “Combatting this epidemic requires solutions that lie at the intersection of data analytics, artificial intelligence, and digitisation.”
CredoLab generates bank-grade digital scorecards to improve access to finance for people with thin credit histories. With customers in 19 countries, the Singapore-based fintech company entered the African market towards the start of last year. “Now financial services companies in South Africa, Nigeria and Kenya can better protect themselves against financial frauds such as identity theft, new account fraud, synthetic identity fraud and account takeover fraud,” adds Kalra.
“We will work with partners in South Africa to try and measure the actual scale and depth of the financial crime in this country in order to help create a healthy financial services sector, improve the trading environment and minimise risk in the financial services and fintech sectors,” he says.