The threat of cyber-crime is becoming increasingly pertinent for the many rapidly scaling segments of the alternative finance space. The detection and prevention of cyber-crime is garnering a fair degree of attention in industry discourse. The deterrence of fraud, in particular, stands out as a topic that is occupying a prominent position within the many risk-focused minds of the sector.
A number of web-based solutions have been vying to position themselves as the risk-mitigator of choice. I’ve been catching up with Ofer Friedman, Vice President of Marketing at AU10TIX, to learn more about the problem.
AU10TIX first cropped up in AltFi News when it partnered with leading consumer lending platform Zopa in November 2014. Weeks later, the FinTech company netted a would-be fraudster on the platform, who was attempting to make off with a significant sum of money. We don’t know exactly how much cash this crook had attempted to draw down, but we do know that the amount saved by the catch was reportedly more than enough to pay for an entire year’s worth of AU10TIX BOS subscription. The value proposition made plain, AU10TIX soon forged a similar partnership with the RateSetter platform.
To offer some perspective on the nature of the Zopa incident, see the image below. One of these IDs is counterfeit. AU10TIX BOS was able to identify this based on the fact that some of the characters in one of the documents below were spaced too far apart from one another.
The P2P lending space is clearly a target for AU10TIX, but the fraud prevention company also works with the likes of PayPal and Forex, and is now fielding calls from age-old financial institutions, such as RBS and Lloyds.
To summarise the proposition in short, AU10TIX provides ID verification services for the sake of preventing fraudulent activity. AU10TIX is by no means alone in this field. Indeed, David Pope, who is Marketing Director at Jumio – a competitor to AU10TIX, recently penned an article for AltFi News, identifying the willingness of P2P lenders to embrace a technology-based approach to risk management as a key advantage over the traditional banking sector. And Mr. Pope wasn’t simply talking the talk. Jumio has been working closely with the rapidly expanding P2P mortgage lending platform Landbay – which secured £250m in lending capital in April.
Every fraud prevention service is different. AU10TIX appears keen to distinguish itself based on two main criteria: the granularity of the results produced by the scanning process, and the fact that it can be used to on-board new customers, as well as verifying existing clients. Ofer Friedman explained:
“AU10TIX distinguishes itself as the only 2nd generation ID authentication technology on the market. AU10TIX technology features true multi-factor ID authentication that includes document tampering forensics and not just data integrity checks as 1st generation solutions. This technology incorporates machine-learning enhanced algorithms that delivers up to 300% higher success rates in handling borderline quality images that so plague online ID mage traffic. AU10TIX technology is notably 100% automated, requiring neither customer inputs nor unnecessary manual examination as conventional solutions do.”
On the software’s customer on-boarding capabilities, he continued:
“Welcome to the world of Secure Customer Onboarding. ID authentication and customer onboarding are no longer separate issues. One integrated process can do both. Faster. Deeper. More effectively. More cost-efficiently. Name of the game is seconds-fast 100% automation, multi-factor authentication, tolerance to image quality variability, and actionable results. You may still use some back office team but only for borderline or focused suspicion cases. Fraud protection meets operating efficiency.”
Should P2P lenders be concerned that mainstream banks are now also turning to the services of technology-based fraud prevention services? Perhaps, but the fundamental advantage of using a software like AU10TIX is to enhance the speed, simplicity and efficacy of what otherwise would be a hands-on process. And as such I would argue that these FinTech firms may be integrated much more readily and effectively with alternative finance providers – which are themselves built for speed and efficiency.
“I think the cyber threat is one of the biggest threats to this sector going forward, given the amount of data that it has.”
AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.