Collaboration, key to fighting FinTech fraud

African FinTech founders have been advised to collaborate with the digital ID industry to stem the growing incidences of fraud within their systems.

This was the summary of discussions at the just concluded Digital Identity 7.0 webinar on the theme, Beyond Compliance: Building a stronger defense against FinTech fraud.

The discussion is set against a reported uptick in fraud within the African financial market which is expected to continue to increase as more people adopt electronic payment methods.

According to Esigie Aguele, co-founder/CEO of VerifyMe Nigeria, owners of QoreID, the archetype for building fraud-resilient systems in developed countries shows the need for stakeholder collaboration in priority areas such as reporting and sharing data on fraud, especially at the point of onboarding new customers.

He noted that while many African companies have adopted this approach on the credit side, the same needs to be replicated on the fraud side.

Aguele continued: “FinTechs should embrace the digital transformation that is happening in the KYC space. Take QoreID, for example. At that point of onboarding, we are really the only layer that has the ability to establish that first trust transaction with the digital ID as well as give the customer more insight in risk assessment and location intelligence.

“These data extend beyond the realm of our customers’ interaction with prospective clients and so we can easily flag individuals’ criminal activities across our network of 150 FinTechs, 16 banks and 14 micro-finance banks.

“Imagine if such a protocol is extended across the industry and backed by regulation? It would provide much needed intelligence that will not only strengthen the risk assessment protocol but ultimately prevent and mitigate future cases of fraud.

“This is why we advise FinTechs against spending so much engineering time trying to augment building KYC engineering products that are not necessary to their core business when there are companies that can provide that service for a fraction of the cost,” he said.

Also speaking during the event, Stanley Jacob, Vice President, FinTech Association of Nigeria, said: “Behaviour tells it all when it comes to digital identity and fraud. Today, we have advanced fraud tools that continue to rely on devices and location. We are now trying to take care of bots. However, we have to focus on behavior and behavioral biometrics to provide a rich layer of defense that can increase trust and provide better customer experience across digital channels.

“FinTech companies that have been suspected of fraud will need to rebuild trust by communicating effectively to stakeholders at all levels. Right now, what we see more often is denials rather than effective communication. FinTechs also need to close operational loopholes. They should conduct periodic internal and external vulnerability assessments, and other relevant testing to have a clean bill of health. If the industry pays close attention to these two things, I believe tensions will drop significantly.”

The Inside Identity webinar series is organized by QoreID, a digital identity and consumer data analytics infrastructure, in partnership with TechCabal, a leading African tech media.

Panelists include Stanley Jacob, Vice-President, FinTech Association of Nigeria; Anthony Onyango, Global Head of Credit, Lipa Later; Daniel Ade-Ojo, Fraud Intelligence Specialist, Moniepoint; Superintendent Henry Ayisi Mensah, District Police Commander, Onyisi, Eastern Region Ghana and Esigie Aguele, Co-founder/CEO, VerifyMe Nigeria.