Ease of transaction has increased the volume of online transactions and exaggerated the associated security concerns. Here we explore the risks of fraud and cybersecurity in the FinTech industry and learn about the strategies that can improve payment security.
The blaze of the FinTech industry into the financial sector, especially in the post-Covid era, has transformed how people handle their finances. The financial sector is undergoing a significant transformation, driven predominantly by the emergence of the fintech revolution. While it has already dualized, the industry is projected to generate $699.5 billion in 2030. The most urgent problem with the FinTech revolution is also its main obstacle, so the loom of financial fraud needs to be carefully managed. On average, frauds cost a U.S. FinTech approximately $51 million annually.
Cybersecurity issues and frauds are also pioneering with the burgeoning indulgence of technology in the financial sector. In the United States, fraud costs the average fintech company $51 million annually. A majority of victims of such frauds are the elderly, with people over 60 constituting 40% of the ravine. However, the quantum of the younger quarry has soured with a spiral of fake and intrusive apps.
Though the threat to the safety of the FinTech industry is massive, with nifty strategies and a proactive approach, the impingement of the same can be mitigated or even wholly eluded. The estimated investment in cyber security will be $9.8 billion by 2024. Some of the unique cybersecurity solutions are:
Biometrics and Multi-factor Authentication: Biometrics or other personal characteristics used in conjunction with multi-factor authentication can offer a great deal of security. More personalized options like fingerprints, facial recognition, and voice recognition postulate a wall of defense that is nearly impregnable. And with more than 83% on board to hedge their bets for a memorable experience, multi-factor authentication, and biometrics are two of the finest security solutions.
Strict Customer Onboarding Process: When processing a financial transaction through FinTech, customers expect it to be simple and quick. However, that should not be the case while onboarding customers, as running at least the most rudimentary perusals is pivotal. A lousy onboarding process often costs FinTech loyal customers rather than retaining them, as approximately 71% of users would not prefer a FinTech impacted by onboarding fraud.
Ensure AML/KYC Compliances: Anti Money Laundering (AML) and Know-Your-Customer (KYC) are exquisite methodologies for preventing fraud in the FinTech landscape. While the compliance requirements may be cumbersome, efforts to ensure their application are crucial. They are tasked with identifying frauds related to payment (59.6%), data security (54.6%), and even a more extended period of completion (49.8%).
However, while devising a stalwart AML and KYC edifice, consider the various steps involved at numerous stages, as the endeavors do not end at onboarding. Organizations should also discern the preponderance of follow-ups and constant monitoring, as periodic audits of customers can disseminate current or potential perils. And the same should be followed by strict procedures for status changes. Numerous cyber security problems can be avoided by implementing redefined, robust, and rigid procedures for any changes to customer accounts.
Tokenization: With a sudden upsurge in first-party fraud and ID theft, tokenization can act as a palisade of protection. Even the global leader of the ascending maneuver of FinTech and UPI alone has 27.7 million victims, with a worldwide total of 55 million ID thefts in 2021. With avant-garde-like tokenization, which supersedes non-sensitive data with sensitive data, payment security can be attained by confusing the fraudsters.
Blockchain: The blockchain industry had a market value of USD 10.02 billion in 2022 and is expected to grow at an 87.7% CAGR from 2023 to 2030. Originally used to create the first cryptocurrency, Bitcoin, blockchain technology has greatly revolutionized the cashless financial landscape by facilitating and securing digital money transactions. As a data management system, blockchain creates an immutable ledger of all transactions, improving payment security.
The first line of defense against cybercrimes and fraud is knowledge. As the fintech industry grows, the risk of fraud and cybersecurity threats also increases. Fintech companies must prioritize the security of their customers’ financial transactions to retain their trust and loyalty.
Using biometrics, multi-factor authentication, strict customer onboarding, AML/KYC compliance, tokenization, and blockchain can significantly reduce fraud and improve payment security. However, fintech companies must continually update and refine their security measures to stay ahead of emerging threats. By adopting these strategies and maintaining a proactive approach, the fintech industry can ensure a fraud-free future and continue to drive innovation in the financial sector.
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