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A large number of financial technology –fintech- companies are battling with increasing online fraud which appear to have become a global trend. In a report Refinitiv projected that fintech industry will grow to about $306 billion in 2023.
In Africa, online fraud follows similar trend seen outside the region, though disclosure level remains weak when compared to global standard – especially for privately held owners run operators, MarketForces gathered.
Fraud is a growing global problem, with some calling the current era a fraud epidemic, said Refinitiv in the industry’s report.
It said in the United Kingdom where fraud is the most commonly experienced crime, reported losses totaled £2.35 billion in the financial year 2021. In the United States, fraud eclipses all other proceed-generating crimes and 2.8 million consumers made fraud reports in 2021, the report added.
Refinitiv understand that the growing online fraud was encouraged by opportunities created during the pandemic, where consumer habits shifted, while remote onboarding and digital banking adoption increased rapidly and at the same time.
Experts in the industry agreed that criminals have been adapting their processes to exploit vulnerabilities in financial institutions and bypass their controls.
Refinitiv said unsurprisingly, one of the biggest threats facing all the fintechs it interviewed was fraud.
“Fintechs cite application fraud through impersonation or use of synthetic identities as persistent threats to tackle, including a rise in increasingly convincing fraudulent and counterfeit documents, which are difficult to detect”.
The report states that fraudsters are using technology to provide better-quality originals which manipulate information and hide changes by using graphics processing and deepfake technology.
“Since fraud is a costly responsibility to bear, encompassing both the value of a fraudulent transaction and the associated compliance resource burden, fraud’s enormous impact on a firm’s bottom line makes it a top priority.
“While fraud remains the current primary concern for fintechs, the consensus view among those we interviewed is that fraud will likely continue to remain concerning for the foreseeable future”.
It cited that a Brazilian digital bank head commenting on the national economic crisis fuelling the conditions for impersonation fraud and money mulling, states: “It has become much easier for fraudsters to convince people to become a money mule.”
According to Refinitiv, A head of compliance in a crypto firm says: “Both in crypto and in the banking space, scam activity is probably the highest that I’ve ever seen.” Bad actors are active in both the crypto and fiat worlds, often with social media enticing people with ‘get-rich, quick’ scams.
Fintech firms told Refinitiv that they are focused on education and raising awareness to help keep customers safe. They also explain that they are increasingly engaged with government bodies.
This engagement includes Singapore Police Force’s Anti-Scam Command (ASCom) Centre, which launched in March 2022 and works with financial services and crypto firms to share intelligence through communication to quickly freeze accounts, reduce losses and recoup funds for those impacted6.
AsCom has since opening helped seize US$10 million, which is the largest amount recovered from a single case to date. Other initiatives include the relaunch of the UK’s Joint Fraud Taskforce and the creation of the US Secret Service’s Cyber Fraud Task Unit.
These organisations bring together the private sector, governments and law enforcement agencies to deter and disrupt fraud and cybercrime through sharing intelligence, best practices and resources.
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