Digital transformation is sweeping across Africa, providing a springboard for financial institutions and fintechs to create new experiences for consumers and businesses.
During the COVID-19 pandemic, millions of people went under lockdown. Due to the health risks of making payments via human contact, a wave of new users started to adopt digital payment technologies.
The pandemic has accelerated this digital transformation considerably, though this transformation has been an exciting development for many, it has also exposed new risks.
One of the biggest challenges now is to keep ahead of potential risks associated with the digital economy – especially around fraud, which could derail progress and hurt businesses and consumers.
This change increases risk and financial exposure for the companies providing these services as new platforms provide new ways for cybercriminals to attack. Africa has major challenges that it needs to overcome in order to appropriately manage and prevent emergent fraud risks.
The digital transformation has brought in a new group of customers for fraudsters to target. Fraud mainly occurs through social engineering: Internet gimmicks and phishing emails or text messages, where fraudsters appear as financial institutions, convincing the user to give away sensitive information and digital IDs.
Low levels of consumer education have made this difficult to manage, primarily because consumers (especially young people) who spend a considerable amount of time on the internet do not know how to manage their credentials and digital footprints as they move around online.
To mitigate these risks, banks have required more sophisticated technologies that can profile customers, including machine learning solutions that can help them understand and track individual spending patterns to detect out-of-pattern transactions more efficiently.
Combining various new technologies helps to protect both the customer and the organisation. The suite of new fraud detection solutions includes strong customer authentication, like biometrics, tokens, and consent management that allows customers to control their interactions. Leveraging biometrics means that banks can put the power in the hands of their customers. For instance, new facial recognition apps can detect if the person in front of the camera is a real human being or a photo being used as a placeholder.
It is also crucial for banks to employ agile fraud management solutions tracking their customers’ transactions irrespective of the touchpoint. They need to use an omnichannel strategy to monitor customer transactions through ATMs and marketplaces and wherever their customers’ digital footprints are.
Fraud is also becoming a major internal threat for many businesses and organisations.
Fraudsters are creative and keep advancing as technology does, actively searching for loopholes they can use. When there are no adequate management solutions to detect and prevent fraud within organisations, it is much easier for fraudsters to operate and carry on their crimes. They can work with outsiders to perpetrate fraud, taking advantage of consumers’ lack of awareness and education.
The good news is that data is increasingly becoming the heart of major operational and strategic initiatives. These days, organisations can leverage machine learning and AI to help detect fraud. Having a cutting-edge fraud system that enables an organisation to respond quickly to the innovations in fraud enables them to manage the risks, ensuring customers are safe when they perform transactions and that the organisation is protected from careless or dishonest employees.