The intricate relationship between fraud and payments is a pressing issue in today’s digital landscape.
As financial transactions are digitising their infrastructures, the sophistication and frequency of fraudulent activities have escalated, posing significant threats to consumers and businesses alike.
From phishing scams to authorised push payment (APP) fraud, criminals are constantly developing new ways to exploit vulnerabilities in payment systems. Companies like SEON are on the front lines, dedicated to combating these threats and protecting the integrity of financial transactions.
In the ongoing battle against financial fraud, the stakes have never been higher. Payment Expert sat down with Logan Porter, Director of Solution Engineering at SEON, during Money 20/20 Europe last week to get an insider’s perspective.
Speaking on current trends in fraud, Porter said: “We’re seeing an increase in the complexity and the sophistication of APP fraud, with the proliferation of tools that allow for voice spoofing.
“We’ve also seen a rise over the last several years of fraud as a service, which has meant that companies have to be very vigilant and take very proactive steps in order to tackle fraud head on.”
Unsurprisingly, as mentioned by Porter, spoofing has become an increased tactic by fraudsters. A strategy that utilises Artificial Intelligence (AI) to impersonate the voice of someone else, which could be a family member or bank.
In fact, Porter explained that one of his colleagues was affected by spoofing, in which a fraudster impersonated his colleague in order to defraud his colleague’s parents.
When fraud like this succeeds, it doesn’t just cost money; it also harms victims personally, making them less trusting. This loss of trust adds to the problems for the payments sector, which relies heavily on customer confidence.
A lot of this loss of confidence comes from the idea that you have been naïve. However, this isn’t the case.
Sophistication – the quality of being complicated or made with great skill.
Porter pointed to the sophistication and complexity of fraud in the modern world. He likened this to how many people imagine fraudsters act, believing they think of a person in a dark room working on their own, but this couldn’t be any further than the truth.
“There are places on say, the dark web, for example, or telegram channels, where these fraudsters are selling the tools to do this and they’re selling courses on how to do these things. It’s very sophisticated,” Porter said.
“There are actual full of networks and they have reviews, reputation scores and things like that. It’s the job of law enforcement to disrupt those communities, but it’s the job of businesses and fraud solution providers to do everything we can to fortify.”
As noted above, fraud is on the rise. According to UK Finance, almost 80% of APP fraud starts online and Brits lost around £459.7m to APP fraud in 2023.
To combat these surging statistics, the Payment Systems Regulator (PSR) has planned to bring in new regulation from October. This regulation centres around reimbursements for victims of fraud, meaning that both sending and receiving firms will split costs 50:50 and victims will receive all of their money back, up to £415,000.
Although the sector welcomes tighter regulation around fraud, many organisations feel that there are details within the new rules that will negatively affect the landscape, with some even sending a letter to PSR to delay implementing the regulation by a year.
On the regulation, Porter said: “Taking those proactive steps and showing that, hey, this is a problem that we take seriously and here are the measures that we’re taking in order to prevent that.
“I’d say if anything, it just reinforces the importance of proactive fraud mitigation and fraud prevention.”
In addition to supporting regulation, SEON are helping businesses and institutions prevent and combat fraud through new innovations and data.
“You have to take a kind of very broad approach to cybersecurity in general, one of the things that we look at,” Porter explained.
“We feel it is very important to establish these sorts of patterns or norms of behaviour, and then looking for really important signals that can find when something is suspicious, because it is outside of the norm of behaviour for a particular individual.”
To collect the data needed for this approach, SEON simplifies data collection for fintech companies and traditional banks with its solutions. By embedding its tools into applications, businesses are able to gather and analyse customer data.
This emphasises the complex pull and tug that is constantly happening between the companies like SEON and fraudsters, in Porter’s words “it isn’t going anywhere”.
Looking ahead, Porter explained that fraud will remain a significant challenge for both customers and institutions. With strengthened reimbursement regulations, there will be a greater focus on preventing attacks. However, as the payment sector shifts towards faster, real-time transactions, the risks of fraud will only increase.
Porter concluded: “As technologies move quicker, the speed of monetary transfer emphasises the importance of real-time decisioning. Companies must take proactive steps to stay a step ahead of fraudsters and avoid leaving themselves exposed.”
