The fight against fraud continues to be pivotal – as the regulatory framework for the payments sector evolves at a rapid pace.
Payment Expert spoke to Ronan Burke, Co-Founder and CEO of Inscribe, as he discussed the role of Inscribe in the sector and why retaining balance in the growth of the sector is of the utmost importance.
Payment Expert: Firstly, are you able to tell us more about Inscribe and what the company does in the payment space?
Ronan Burke: Our mission at Inscribe is to create a fair and efficient financial services ecosystem. We want to help more good customers access financial services, while keeping the fraudsters out; and at the same time, increase the efficiency of doing so by automating the most tedious account opening and underwriting workflows.
In the payments industry, we help payments companies onboard their customers and comply with KYC/KYB regulations. In particular, we automate the review of onboarding documents such as utility bills and articles of incorporation that prove addresses and corporate control. Companies that use Inscribe are able to approve more customers, reduce fraud losses, and increase decision accuracy.
PE: How much have we seen the threat of fraud evolve over recent years?
RB: The pandemic has been the defining event in fraud in recent years. At the start, we saw two things happen: First, many businesses and people unfortunately were struggling to make ends meet, and would apply for loans with fraudulent applications to get access to more favorable terms. Second, governments around the world started offering government-backed business loans, and fintechs started originating and screening these loans.
Given the burden of risk was taken by the government, the controls in fintechs were initially quite light and fraud rates skyrocketed. Research by a team at the University of Texas at Austin reported that ~1m PPP loans worth $35.4B had multiple indicators of fraud.
PE: Do you believe flexibility from merchants and fintechs is crucial if they are to keep up with the approach of fraudsters?
RB: Merchants and fintechs want to grow as fast and efficiently as possible, while maintaining compliance and keeping fraud rates under control.
This is a difficult balance to successfully manage due to the evolving nature of fraudsters and the increasing levels of competition between companies.
To stay ahead of fraudsters, companies need to be flexible with their fraud detection strategies so they can quickly adapt and combat fraudsters when vulnerabilities are discovered.
PE: How significant has AI been in halting the flow of fraud?
RB: Machine learning has been the most significant tool enabling companies to stay ahead of fraudsters. One of the earliest successful applications of machine learning was detecting email spam, which has many similarities to fraud detection.
Machine learning is one of the best weapons against bad actors because it can make sense of large amounts of data quickly, and identify patterns humans can’t. It can also improve the more data it receives and can scale efficiently. This scalability has proven to be incredibly important with the increase in data available in recent years.
PE: What can fintechs and the payment industry do to ensure that AI tech is maximised in combating fraud?
To ensure the benefits of machine learning are applied appropriately, it’s important to utilise best-in-class machine learning solutions, collaborate across the ecosystem, and nurture a data-focused culture within companies.