As the payments industry grapples with increasingly sophisticated fraud technologies such as deepfakes and generative AI, the importance of collaboration across sectors is gaining recognition. Financial institutions, ecommerce sites, government agencies and others are realizing that cooperation and sharing of fraud data can drastically reduce crime and financial losses. Let’s take a closer look at the part each entity can play in this critical fight.
Government
Governments are responsible for creating effective laws, educating businesses and consumers, and then monitoring for compliance with the regulations they create. But they are also starting to understand the need to look beyond their own jurisdictions and cooperate with governments in other regions and countries. This is particularly important for stopping fraud in cross-border payments. Furthermore, governments need to collaborate more closely with the private sector, especially financial institutions.
Financial Institutions
Financial institutions are on the front lines when it comes to payment fraud — and they stand the most to lose when fraudsters slip through the cracks. It’s fundamental for these firms to provide safe products and services that protect their customers as well as their own reputations. This requires staying up to date on the latest technologies and fraud trends and putting the right processes in place to catch fraud in real time. It’s also essential that they report fraud immediately to government agencies as well as ecommerce sites where fraudulent payments may have originated.
Ecommerce
Thanks to the explosive evolution of AI, there has been a dramatic increase in fake ecommerce sites, some using a very similar URL to a legitimate site. Unsuspecting customers can easily end up on one of these sites to make purchases and payments — only to have their funds disappear. It’s essential for ecommerce companies to be able to implement certification seals that consumers can trust, and to put processes in place that protect the site and customer accounts.
For example, the Colombian Chamber of Electronic Commerce (CCCE) launched the e-Trust Trust Seal, which certifies compliance with good practices in online commerce companies. This is an important step for building trust online — in a consumer survey conducted by the CCCE in collaboration with the Centro Nacional de Consultoría, 30% of those surveyed said they have not made purchases online due to mistrust in transactions, 11% doubt that the products are the same as those shown and 7% mistrust the logistics processes.
As with financial institutions, ecommerce sites must implement the right fraud-detection solutions to keep their customers’ accounts safe. According to one study, 63% of buyers would not return to a website if they believe they may be a victim of fraud. Clearly, ecommerce companies must be able to detect fraud in real time. That’s why many ecommerce companies are switching to biometric identity verification during account opening and are also embracing biometric payments, which allows consumers to take a selfie or palm scan to prove their identity and then instantly transfer payment. And for the safety of the entire financial system, ecommerce companies should report suspicious activity to government agencies and to financial institutions where funds are being transferred to or from.
Cybersecurity
Cybersecurity firms can play a major role in stopping payment fraud by performing threat analysis audits and evaluations for financial institutions and ecommerce sites. Using controlled testing spaces, they can identify any security weaknesses and gaps and help firms evolve their security protocols. But even the best protocols can be bypassed by humans when they fall victim to social engineering and similar attacks, so ongoing security training for all employees at vulnerable companies is essential. By sharing knowledge on the latest schemes, employees have the best chance of spotting an attack before it does actual damage.
Consumers
As with employees at financial institutions and ecommerce companies, consumers must stay up to date on fraud trends and should know how to spot phishing and other types of schemes that might fool them into sharing their credentials or making payments directly to a fraudster. Online businesses can help by displaying warnings when they provide an authorization code to the consumer or when the user is about to transfer funds. Consumers should also be careful to use only secure payment methods, avoid using the same password on multiple sites, and regularly check their credit reports to see if accounts have been opened in their name. They should also immediately report any suspicious activity to their financial institution.
Conclusion
Cross-sector collaboration in the payments industry allows everyone to have a better understanding of the fraud landscape and leads to the development of better strategies for fraud prevention. Governments must work with the private sector to draft reasonable, effective regulations and make sure companies are complying, and they need to collaborate with other governments across jurisdictions. Financial institutions and ecommerce sites must put the proper safeguards in place and use the most advanced fraud-prevention technology to ensure they stay ahead of rapidly evolving fraudsters. Cybersecurity firms can help by monitoring security threats and training employees to spot fraud. And consumers can help by staying educated and aware so they don’t accidentally open a back door for fraudsters and by reporting any suspicious activity.
To learn more about how Jumio helps firms in the payments industry know and trust their customers online and keep fraudsters out, just fill out this form, and we will be in touch shortly.
