Analytics software firm FICO has been engaged by Vodafone, a leading telecommunications company in Europe and Africa, to review new fraud risks and mitigations arising from the accelerated adoption of digital channels due to the pandemic. The FICO Advisors consultancy team will assess Vodafone’s operations across 19 countries and advise on tackling new fraud risks at a country level.

The FICO Advisors team will analyse current fraud controls in areas such as customer identification and authentication, tools and technology, digital strategies, digital processes and fraud loss recording and reporting.

“In the telecom industry, the use of digital channels is growing and replacing traditional sales and service channels,” said Steve Hadaway, Vice President and Managing Director of FICO in EMEA. “With COVID-19, data usage and online transaction volumes have soared, and this is also driving more fraud to migrate to digital channels. We are using our extensive expertise to assist telecommunications organisations around the world.”

“The massive growth in digital engagement has changed business around the world,” said Andy Mayo, senior group fraud manager at Vodafone. “With this study, we plan to probe deeper and learn how we can offer even better protection to our customers. We chose the FICO team because of their expertise and experience in telecommunications, specifically in fraud and digital practices.”

For more information on FICO fraud solutions for telecommunications:

https://www.fico.com/en/latest-thinking/product-sheet/fico-fraud-solutions-telecommunications

Written by Colin Sims, Chief Operating Officer, Forter

Abuse is growing in volume and attention

Policy abuse is a recurring topic in my recent conversations. As eCommerce has grown rapidly, so have the types and amount of abuse.

Gartner identified policy abuse as a key differentiator of platform solutions in their just published Market Guide on Online Fraud Detection; I’d argue that it’s a requirement. And in a recent 451 Research study, when asked where they had seen a notable increase in losses, participants pointed out policy abuse (34.7%), friendly fraud (34.7%) and loyalty program fraud (34.1%) among their top five responses¹.

The challenge is that in many of these conversations, abuse and fraud are treated as similar. Other vendors in our eCommerce optimisation market reinforce this perception, promising to address fraud and abuse at the same time. The truth is that fraud and abuse are fundamentally different—they must be tackled with different technologies and tactics or you risk significant – and often unintended – disruption to customer experience and revenue.

Abuse is fundamentally different from fraud

Stated simply, fraud is when someone other than the card or account holder is involved in an interaction. Fraud can only happen with wilful manipulation of a digital identity, and that tells you something about how to defend against it. We also know, empirically, that while the attempted fraud on a given site (what we call “the fraud pressure”) is a function of many things, it is generally predictable and the most important factor is the nature of defences that are in place. If your defences are good and consistently turn away bad actors, then fraudsters will migrate to an easier target.

Abuse is another matter altogether. These are users that, for the most part, are not hiding their identity. Abuse stems largely from good customers who are taking advantage of permissive policies, or who have legitimate claims. And because they are not hiding their identity, they know that there is an upper limit on how much they can claim or the merchant will stop doing business with them.

In summary, abuse is perpetrated by your customers, and fraud is perpetrated by people who are not your customers.

Let’s go a little deeper, because this is an incredibly important point: If fraud is perpetrated by people who aren’t your customers, then you won’t recognise them. You need to block them over and over, before they can checkout, and do it consistently or the fraud pressure will persist. That makes fraud detection incredibly hard for merchants to do – they need a broader dataset across merchants to accurately identify fraudsters.

Merchants do have the dataset to recognise abuse; what they lack are good tools to link together and collapse accounts that are created by serial abusers. While fraud “pressure” is mostly predictable across eCommerce, and is largely a function of your defences, abuse pressure is much more idiosyncratic, and is almost exclusively a function of policies specific to the merchant and how those policies are enforced. For example, we see that when it comes to service chargebacks, legitimate customers – even those who are abusive – do not behave the same way on different sites. Therefore, it would be a mistake to universally block those customers at checkout.

Return policies matter. Customer service matters. The shipping policy and vendor matters. And whether or not there is a consequence to their actions matters. Did you try to close their account? Did you deny the INR claim after the third time, the tenth time, etc.?. These are the questions a retailer should be involved in, because it goes to the fundamental relationship that a retailer has with its customers. Most retailers should, and do, care about this a lot.

The right way vs. the wrong way to address abuse

Fraud and abuse are very different problems, perpetrated by an entirely different set of actors, requiring a completely different set of technologies and tactics. I have run operations for an eCommerce retailer, and I’m sympathetic to the temptation both to build things in-house, and to consolidate vendors. But now that I am on the vendor side my perspective is informed by conversations with many merchants across different verticals, and I’m concerned by some of the trends I’m seeing.

For example, we have seen some fraud detection vendors start to “cover” (where the merchant pays to shift the chargeback liability) on things like Item Not Received (INR) claims and other service chargebacks. I can see why this appears compelling to the merchant – INR claims are indeed on the rise, so it seems to magically make the problem disappear – but there is nothing the fraud vendor can do to manage the risk without interfering in the merchant-customer relationship. That relationship, in my humble opinion, is the merchant’s business.

For example, I would never presume to write the Return Policy for one of our customers, even if that was the root cause of 90% of their abuse. Nor would I decline a buyer who was not manipulating their identity on the presumption that they might file a service claim because people keep stealing their packages. Nor does it make sense to only address service chargebacks after they have already happened (in the dispute process). But when a vendor takes responsibility for abuse they would have to do all of the above.

Two closing thoughts to frame fraud and abuse

Both fraud and abuse are, fundamentally, risk management functions, and any eCommerce company at scale benefits from building them. But it is important that in doing so, they invest the resources that produce both the best outcome for the customer and the best economics for the business. I leave you with two key statements that I hope will be helpful in framing fraud and abuse:

1. The right way to think about fraud is to acknowledge that the main value of fraud vendors is to provide hyper accurate fraud detection that scales. The vendor must be able to leverage a unique dataset that spans different verticals and geographies and helps you make decisions about buyers you don’t recognise, even as they manipulate their identity.
2. The right way to think about abuse in any form (returns, INR, promo) is to find a vendor that makes you smarter.  That vendor should not simply shift responsibility; they should help you identify and prevent root causes. You should gain access to better tools for measurement and insight into your dataset, and unique expertise to help you apply thoughtful policies that drive the right outcomes. Those policies should never interfere with the sacred relationship between you and your customer.

Kevin O’Leary, notable for his role on Shark Tank, has made an about-face on digital assets. Originally a skeptic, the businessman has, this month, announced that nearly 10% of his portfolio is now invested in digital assets. O’Leary isn’t the only famous businessman to espouse the benefits of cryptocurrencies. Mark Cuban and Elon Musk, in particular, have long been cheerleaders for the new investment class.

“What’s interesting about celebrity business leaders embracing crypto is that they’re moving digital assets further into the mainstream just as central banks are planning to launch digital assets of their own. At the same time, institutional investors are also coming on board. The culmination of these events mean that the industry is desperately in need of custody services which are up to the task of keeping these new investors safe. Digital assets are different from traditional assets in a way which requires more from custody providers,” said Richard Gardner, CEO of Modulus, a US-based developer of ultra-high-performance trading and surveillance technology that powers global equities, derivatives, and digital asset exchanges.

“Because of their digital nature, cryptocurrencies are more likely to be the target of hackers and other bad actors. That means that custody providers are charged with the increasingly important job of actually safeguarding those assets. In a digital world, custody is more than an administrative function. Now, it is a security function,” noted Gardner.

A Mordor Intelligence Report on Digital Asset Management noted, “The digital asset management market was valued at USD 2,962.2 million in 2020, and it is expected to reach USD 8,158.6 million by 2026, registering a CAGR of 18.46% during the period of 2021-2026.”

“What that means is that institutional investors are buying in, lock, stock, and barrel. That also means that there’s more value in the holdings of digital assets. The more valuable the asset, the greater the target for bad actors,” said Gardner. A 2020 Deloitte report, citing Coindesk, notes that there has been "a 13-fold increase in the amount stolen from cryptocurrency exchanges between 2017 and 2018, a figure that stands at almost US$ 2.7 m per day."

“Cryptocurrency exchanges need custody services to keep their assets more secure. Institutional investors definitely need to secure their assets. However, right now, many of the leading custody providers have major security issues. One, in particular, is in the midst of a lawsuit which alleges it is responsible for more than $70 million worth of losses. The entire point of utilizing a custody service is for investors to know that their assets are safe until they wish to move them. A loss valued at $70 million doesn’t exactly scream safe haven,” opined Gardner.

Modulus is known throughout the financial technology segment as a leader in the development of ultra-high frequency trading systems and blockchain technologies. Modulus has provided its exchange solution to some of the industry’s most profitable digital asset exchanges, including a well-known multi-billion-dollar cryptocurrency exchange. Over the past twenty years, the company has built technology for the world’s most notable institutions, with a client list which includes NASA, NASDAQ, Goldman Sachs, Merrill Lynch, JP Morgan Chase, Bank of America, Barclays, Siemens, Shell, Yahoo!, Microsoft, Cornell University, and the University of Chicago.

“The industry has some soul searching to do. Without custody, the cryptocurrency segment can’t expand. With the existing options in the space, it is hard to see institutional investors feeling secure, especially as more and more of their clients begin to dip their toe in the crypto pool. In order for digital assets to truly flourish, there needs to be a major realization, along with an industry realignment, among custody providers that their clients demand more from them,” noted Gardner.

Tinkoff has acquired a controlling stake (51%) in Just Look, the developer of Jump.Finance, a fintech service that automates interactions with freelancers, including payments.  

The deal was undertaken on behalf of Tinkoff Business, the branch of Tinkoff Group that services small, medium-sized and large businesses. Jump.Finance will be integrated into the Tinkoff Business ecosystem and retain its current team. The financial terms of the deal have not been disclosed. 

Jump.Finance is a leading provider of payment automation software for taxi fleets, car dealers, scrap collectors, delivery companies and other businesses that work with self-employed contractors. The service also helps streamline paperwork, accounting and order management.

Jump.Finance will add value to Tinkoff Business’ set of industry solutions for businesses and entrepreneurs. Jump.Finance customers will receive seamless access to business finance products such as credit, identification, virtual card issuance and account management. 

The service is currently used by over 3,000 companies, making payments to over 500,000 individuals and self-employed persons. 

Medium-sized and large businesses working with individuals and self-employed persons are core customers of Jump.Finance. The company expects to generate approximately RUB 200 mln in revenue for 2021, up 200% year-on-year. 

The project will retain its current team, including co-founders Mikhail Kirichenko and Anton Kirillov. 

Stanislav Bliznyuk, Chairman of the Management Board at Tinkoff Bank, commented: 

“Tinkoff Group aims to become a strategic investor in companies that demonstrate sustainable growth, and are able to strengthen our individual business lines, as well as the Tinkoff ecosystem as a whole. 

Jump.Finance is one such project that shares our mindset. Tinkoff Business has its own ecosystem of services for businesses, and Jump.Finance, one of the largest providers of payments solutions to individual contractors for companies, will make a great addition to it. 

By combining Jump.Finance technologies and Tinkoff Business infrastructure, we can create best-in-class solutions for companies across different sectors. We remain open to integrating other solutions into our ecosystem, where we can enable their significant growth by providing access to Tinkoff’s financial technologies.” 
  
Mikhail Kirichenko, co-founder and CTO at Jump.Finance, commented: 

"We were able to build a fast-growing and profitable business from scratch by investing only our time, effort and savings. With this agreement, Jump.Finance will become available to all Tinkoff Business customers straight ‘out of the box’ when they open a new settlement account. We believe that synergies with Tinkoff will enable us to not only boost our growth, but also to achieve the initial goal that we, as founders, have set for this product -- to become the main financial tool for all companies working with individuals and self-employed persons, in addition to using traditional settlement accounts for legal entities.”  

Interestingly, this year’s report reveals that External Fraud has entered the top five (from 9th place), replacing Business Continuity. The variety, volume, and sophistication of External Fraud attempts present an evolving and ever-present challenge in an economically turbulent environment.   

 2. The top five ranked risks from the last three Top Risk Review surveys  

Luke Carrivick, Director of Research and Information from ORX explains, “Fierce competition from digital-centric disruptive market entrants, the threat of rapidly evolving cybercrime, the lasting impact of the COVID-19 pandemic, and growing stakeholder expectations are all driving firms to adopt new technology at a faster pace than ever before. 

“The knock-on effect is a new form of risk management that will mitigate any potential oversight of change and vulnerabilities that may be exposed, discovered and potentially exploited (e.g. by cyber criminals) along the way. 

“At the same time, I’m not surprised to see an increase in External Fraud in this latest report. External Fraud has been an ever-present risk and alongside a growing cyber threat there has been an increasing variety of physical external fraud. These, combined with increasing fraudulent activity and customer vulnerability due to COVID, has created the perfect storm.   

Information security, including cyber, has topped a league table of operational risk concerns for risk professionals at global financial services organisations.  Followed by Technology and Third-party Risk, all three top risks reflect the industry’s current strategic priorities, with digital transformation heavily impacting these scores.

The findings were published in a report from ORX, the world’s largest operational risk association with a membership of over 100 banks and insurers globally.  

According to the report – Top Risk Review November 2021– information security risk, driven by cyber threats, continues to challenge the industry. With digitalisation continuing at pace and on a global scale, the cyber security risk landscape is evolving rapidly with more frequent and sophisticated attacks, especially phishing and ransomware - all creating a sense of ‘living in constant fear’.   

However, the good news is that whilst firms are seeing an increasing number of events across a range of industries, most are avoiding successful attacks.  

Figure 1. The top current risks facing the industry by rank score 

Interestingly, this year’s report reveals that External Fraud has entered the top five (from 9th place), replacing Business Continuity. The variety, volume, and sophistication of External Fraud attempts present an evolving and ever-present challenge in an economically turbulent environment.   

Now that the impact of the pandemic is beginning to be realised, the business continuity challenge is evolving.  Businesses are now focusing to a greater extent on building their operational resilience, with focus on areas such as the impacts of hybrid working, and longer term, how a changing climate will impact operations.”

First crypto risk management platform for institutions, utilizes Cloverly, a sustainability-as-a-service platform, to help the crypto industry offset its environmental footprint.
Diversifi, the first tech-driven crypto risk management platform for institutions, and Cloverly, a sustainability-as-a-service platform, cooperate on helping the crypto industry offset its environmental footprint. Diversifi automatically offsets the carbon footprint of crypto holders by calculating the carbon footprint and utilizing Cloverly?s carbon offset API. The offset addresses the impact of Bitcoin mining, Ether mining, and smart contracts execution, including minting NFTs.

"We remove the complexities from the process. We want crypto investment to be a safe, positive and responsible thing: we provide ways to hedge against risk and protect against losses without affecting the environment. No other company offers that," says Eitan Katz, the CEO at Diversifi.

The service is available through the Diversifi platform dashboard. Users need to specify the amounts (BTC or ETH) they want to offset. The Diversifi platform calculates the costs and executes via the Cloverly API.

"The Cloverly team is very excited to be working with Diversifi. Combining crypto and sustainability is a much needed offering due to the energy-intensive nature of this industry. Diversifi are clearly thought-leaders in their space by bringing this offering to market."

We welcome the shift of miners to more usage of renewable energy, as well as the move to less polluting consensus mechanisms (i.e. PoS). In the meantime, we invite every HODLer, trader, asset manager and miner to invest responsibly in more sustainable cryptocurrency. Funds, corporates, asset managers, family offices could already use the new service. To celebrate the launch, and for a limited period of time, Diversifi will not incur any additional fees other than the fees charged by its partners. The service is available today in every jurisdiction.

Following this year’s UAE success, iFX EXPO Dubai 2022 will be sweeping into an even larger venue for another action-packed show. The eagerly-awaited expo will take place at Za'abeel Hall 6, Dubai World Trade Centre from 22-24 February 2022 and is expected to attract more than 3000 attendees.

Organised by Ultimate Fintech, the event will scale up at the UAE’s leading event venue and the largest exhibition centre in the world. It’s a location that can support a larger audience. And one that perfectly reflects the expo’s size and extravagance.

Registration to the iFX EXPO Dubai 2022 is now officially open! Be sure to sign up early to secure your place and avoid disappointment.

So, what can you expect from the world’s largest financial business-to-business conference? There are many reasons why this is a must-attend event, here are just a few…

Ultimate Networking Opportunity

iFX EXPO Dubai 2022 provides a wonderful opportunity for those in the finance and fintech space to grow their business network. Every year, the event attracts decision makers from leading organisations including those that are driving sectors forward through innovation and discovery. Expect to meet people at the top of their game from many different fields including.

• Technology and Liquidity
• Digital assets and Blockchain
• Retail and Institutional Brokers
• Payments and Banks
• Affiliates and IBs
• Regulation and Compliance

With everyone gathered under one roof to talk about the finance space, this is your chance to grow your industry knowledge and share your business experience. From arranging meetings with CEOs and partners, to exhibiting your company’s latest products and services, there’s plenty of room to shine at the iFX EXPO Dubai 2022.

World-Class Content and Speakers

At an event of this calibre, you can expect nothing but world-class content and industry pioneers discussing key topics live on stage. While last year’s event was very much dominated by the change of landscape due to the pandemic, next year will showcase the progression made during a turbulent yet productive era. COVID-19 has undoubtedly accelerated the finance and fintech space in new and interesting ways and those working at the heart of the finance sector will share their insights, progress and future projections in front of an equally intelligent and inspired audience.

There’s always opportunity for lively debates, discussions and questions, with a wide range of topics giving way to a host of educational and inspiring material. Watch this space for the line-up which will certainly include top names from some of the world’s biggest finance and fintech companies.

Become a Sponsor or Exhibitor Now

The iFX EXPO Dubai 2022 provides exceptional exposure and sponsorship opportunities, allowing you to project your brand image in front of a relevant audience. Contact sales@ifxexpo.com for more information on sponsorship and exhibitor opportunities.

Why Dubai?

There are many reasons why Dubai makes for a great financial EXPO location. It’s recognised as the leading financial centre in the Middle East, Africa and South Asia region. It has a vibrant ecosystem, with new company registrations at Dubai International Financial Centre rising 59% annually in the first half of 2021. About 492 new companies joined during this period, taking the total number of active registered companies in the financial free zone to 3,292 in the January-June period alone.

A Covid-Safe Environment

Lastly, it’s important to touch on safety regulations. As an event welcoming some of the biggest and brightest thought leaders from across the globe, great care and attention will again go into keeping everyone safe. The EXPO will take place in accordance with the local COVID guidelines applicable at the time and all protocols will be observed.

Reach Out To Ultimate Fintech today for more information or register your attendance NOW!