In financial services, the greater the surface area, the greater the chance the fraudsters will strike — and be successful.
Featurespace Founder David Excell told Karen Webster that Payments-as-a-Service (PaaS) providers, banks and security firms must join forces to beat back the bad actors.
Advanced technologies, online platforms — and the wealth of data at everyone’s fingertips shared across partnerships and analyzed in real time — can offer the lines of defense against an ever-changing risk landscape.
The approach is relatively new when measured against the way financial services firms historically have gauged risk in the past. Excell noted that fraud models have typically used 12 to 14 months of historical data.
“But the past is not a predictor of the future,” he said, certainly not with the rise of card-not-present (CNP) transactions and the rise of new and alternative payment methods where that data may be relatively limited.
“The fraud vectors are evolving in new and creative ways,” he said.
PaaS programs have emerged to provide the latest technology, services and program management with little overhead and investment. Banks, third-party payment processing companies or any company can take advantage of it to boost the customers’ payment experience.
FinTechs have created cloud-based platforms that provide specialized payment services for banks, payments service providers (PSPs) and other organizations so they can create new payment experiences at scale for their end users.
The advantage of working with the third-party providers is that client firms can bring new payments experiences to users at scale. But realizing that potential is not without its challenges, as the risk of fraud is ever present.
For the payments and Banking-as-a-Service (BaaS) providers themselves, there’s a delicate balancing act that underpins it all, Excell said. The providers must ensure the right level of information is shared among all parties. Security of that data remains critical, but security needs to be folded into the overall customer experience such that the consumer journey across daily financial life remains uninterrupted.
As financial institutions (FIs) enable and deploy new payment methods, they must take into consideration how the customer journey will take shape and how risk fits into the equation. Sharing knowledge with other FIs can help the financial services industry at large solve its problems and innovate safely.
As for the data — how, when and where it’s shared is important, said Excell. Consistency is the overarching goal and needs to be in place if enterprises want authentication and authorization to happen in real time.
“The last thing we want to do is create more silos where a decision gets made within a bank that would be a different decision that’s made with the Payments-as-a-Service provider,” he said.
“The platforms have larger ‘surfaces’ and are able to see multiple attacks taking place across a wide range of their customers,” said Excell, and how these attacks may be varied as they target different firms on the platform.
The collaborative approach with security providers (Featurespace among them) also gains an ecosystem-wide view of the effectiveness of the risk management solutions, to the minute and to the nano-second.
“When fraud is identified and experienced by the end customers, that information is fed back to the platform so that everyone continues to learn,” he said.
In a bid to make sure fraud is not penetrating payments/BaaS providers’ platforms, machine learning (ML) and artificial intelligence (AI) are potent weapons in the fight against fraud. These real-time tools help companies adapt with speed in ever-changing threat environments and improve customer experiences in the meantime.
With some margin protection, too, the platform approach means that new security features can be added as needed, Excell said. That’s a form of “future proofing” against the specter of costly ripping and replacing of legacy systems.
The real-time data flow gives firms the chance to understand how consumer behavior is changing and helps form a baseline of what might be termed standard or normalized behavior, even in an age where we’re transacting with so many firms, in so many ways, across so many devices.
Of the platform and collaborative approach, Excell said, “being able to share this data helps us all start to unlock a better future” across banking.