Mounting a counterattack on Payment Fraud

Digitalisation has been building momentum since the onset of Covid-19 with most consumers opting for cashless and contactless payments through apps, digital wallets and card-not-present (CNP) transactions. With new opportunities in the payment trajectory, more cyber criminals have emerged to exploit weaknesses of these merchants. For many financial institutions, these scams are proving extremely challenging to combat.

The question now is if digital payments are safe?

In this week’s chat, we sat down with Walter Lee, Evangelist & Head of Public Safety Consulting, NEC APAC who shares his thoughts on how one can combat fraud, how the competitive landscape is heating up, the use of cutting-edge tech and the trends we’ll be seeing in the next few years.

Finish this sentence; Online financial frauds and digital payment scams are not exactly new...

"...it has been further accelerated as more businesses are conducted online, even more so with the pandemic still raging globally. Hence, it is critical that more secure solutions are deployed to mitigate such risks.”

As we move towards a digital, real-time, and cashless society, what are the impacts of digital payments on customer behaviour and financial crime?

Digital payments are fast becoming the norm, for convenience as well as other factors such as hygiene, safety and efficiency, given the pandemic. This pandemic has certainly accelerated further acceptance of cashless and contactless payment, from QR codes, to biometric-enabled digital payments. As more and more transactions are happening online, the risk for online fraud also increases in tandem. Identify theft and fraudulent payments are increasing. Such risk can be mitigated with better technological advances such as “liveness detection” for biometrics, which reduces fraud from fake photos, videos etc., masquerading as the real person. Multi-modal authentication, be it with multiple biometric domains, such as facial, iris, fingerprint, or with a multi- factor such as password and biometric, device and biometric, etc., can reduce the risk even further.

What are some initiatives by NEC to support increased efficiency and transformation of financial institutions?

A. NEC has established Value Chain Innovation Lab, APAC focused digital finance and banking incubation lab team based out of Singapore and supported by NEC labs from Singapore / India / Japan and Europe.

B. Key focus is collaborate and co-create with banks, Fintech and other financial institutions to partner and execute MVP hypothesis.

C. Pilot, launch and learn, test scale benefits, de-risk. Operationalize and scale new value proposition(s) along with the partner banks and financial institutions.

D. Partnering in bank’s transformation journey.

E. NEC’s strength in biometric-enabled Digital Identity is one of the innovative ways for accelerating the efficiency and transformation of financial institutions. For example, NEC provides facial recognition for E.SUN Commercial Bank in Taiwan, contributing to safe, secure, and convenient financial services.

F. NEC has also supported the usage of A.I. for financial institutions with advance A.I. platforms such as dotData

NEC provides facial recognition for E.SUN Commercial Bank in Taiwan – Contributing to safe, secure and convenient financial services (source: NEC).

What steps can the payments industry as a whole take to lower the chance of digital payment fraud?

Such risk can be mitigated with better technological advances such as “liveness detection” for biometrics, which reduces fraud from fake photos, videos etc., masquerading as the real person. Multi-modal authentication, be it with multiple biometric domains, such as facial, iris, finger-print, or with a multi-factor such as password and biometric, device and biometric, etc., can reduce the risks even further.

What are the top 3 key trends that we expect to shape 2022 for real-time banking and payment solutions?

1. Cashless and Contactless payment will fast become the norm for all payments.
2. Digital banking will be the primary mode for the vast majority of customers in performing their financial and banking transactions.
3. There will be the emergence of more forms of official Digital Currency, or Digital Coin, such as the Digital Yuan

Can artificial intelligence and machine learning tools help tackle digital payment fraud?

Artificial intelligence, utilizing deep learning, will certainly help in reducing potential payment fraud. Such solutions will help to identify potential unusual transactions, or potential risks associated with certain patterns of transactions, for example.

What additional challenges are you facing, and what skills have you gained that have been useful during these times where you have been forced to adapt?

I think the pandemic as well as the growing need for sustainability have accentuated many industry pain-points and concerns. These areas of concern are also opportunities if we seek to tackle them heads-on. Some examples include:

1. Data privacy and cyber security concerns as data becomes the new “fuel”, i.e. the wide-spread use of data-mining;
2. Accelerated shift towards e-commerce will increase the use of embedded banking capabilities;
3. There will be further increase in cross-border, cross-currency and B2B payments such as the recently announced India and Singapore linkage of payment systems between the Unified Payments Interface (UIP) of India, and Singapore’s PayNow.
4. Collaboration between traditional financial institution and Fintech / technology companies to innovation into new areas, including the circular economy, as an example.

What will you be sharing at the upcoming Fintech Connect conference and why is this a must-not-miss event?

I will be discussing about the latest disruptions in the industry accelerated by the pandemic, and how the latest solutions such as advances in biometric-enabled Digital ID, are becoming more human-centred, to bring us towards Society 5.0, the next evolution of societal development beyond Industry 4.0. I will also share about how A.I., Ethics and Governance, are increasingly even more relevant and important as advanced A.I. solutions are being deployed to improve security, efficiency and effectiveness for the industry.

Register now to attend the much-anticipated FinTech Connect Asia (Virtual Main Conference Days: 6-7th October, SGT).