In the fast-growing world of fintech, effectively managing fraud poses a critical challenge for startups. In fact, according to a report by the World Economic Forum, the global cost of cybercrime is expected to reach $10.5 trillion by 2025. In Africa, the financial sector is the most targeted by cybercriminals, accounting for 60% of all attacks and resulting in losses estimated at $4 billion every year, per a report by IDC.
Per 2023 Africa Financial Industry Barometer, developed in partnership with the Africa Financial Industry Summit and Deloitte, 97% of surveyed executives at top financial institutions in Africa consider cybercrime a significant threat. While maintaining a seamless user experience is essential for growth, many fintech startups struggle to implement fraud control measures without hindering their customers’ satisfaction. Fintechs are particularly vulnerable to fraud, as they are often new and have not yet developed the robust security measures that larger financial institutions have.
Fintechs and other financial institutions need to invest in building robust security measures into their products. They need measures aimed at combating hacking and other security threats, as well as regular security updates.
“The importance of continually updating technology to effectively monitor and assess fraud is essential, as it suggests that partnering with digital KYC providers can assist fintech companies in mitigating fraud effectively,” said Daniel Ade-Ojo, a fraud intelligence specialist at Moniepoint during the latest edition of Inside Identity—a virtual event series by QoreID, in partnership with TechCabal. He emphasized the need for fintech companies to establish a robust security system by leveraging standardized and advanced programs.
In 2022 alone, there were over 100 million cases of identity theft in Africa, resulting in losses of over $10 billion. Esigie Aguele, the co-founder and CEO of VerifyMe Nigeria, shed light on the prevalence of identity fraud in Africa and the necessity of building up-to-date technologies to counter this issue. “Collaborating with KYC specialists instead of developing in-house KYC products to effectively combat identity fraud is important,” he said.
Similarly, Henry Ayisi Mensah, the district police commander in Oyibi, Eastern Region, Ghana, emphasized the significance of cross-checking for duplicate documents during customer applications. He stressed the importance of collaborating with specialized KYC service providers to effectively mitigate financial fraud.
However, there is also a place for prioritizing regulators when investigating fraud, such as compliance, transparency, and integrity. Stanley Jacobs, VP of the Fintech Association of Nigeria, emphasized effective communication and accountability for fintech companies as they grow, and as the risk of fraud and cyber-attacks increases. He highlighted the need for behavioral monitoring, blacklisting management, and comprehensive KYC and customer identification practices to identify and prevent the infiltration of new malicious applications during account opening.
Partnering with KYC providers that have the expertise can help fintech companies mitigate fraud and verify the identity of customers to help prevent fraudulent transactions. Anthony Onyangbo, the head of global credit at Lipa Later, affirms this position by proposing the outsourcing of KYC processes to specialized service providers as a viable approach for fintech companies to counter financial fraud.
The importance of a collaborative approach and robust security measures to safeguard the fintech industry cannot be overemphasized. Fintech companies and financial institutions should prioritize adopting an end-to-end fraud strategy. This strategy should be seamlessly integrated into their products to provide a smooth customer experience, while also implementing identity controls, fraud reduction measures, and customer protection.
Inside Identity aims to foster knowledge-sharing and collaboration within the fintech and KYC industries by encouraging discussions on proactive security measures, collaboration with KYC specialists, and staying abreast of technological advancements.