Debit card fraud spotlights FinTech’s need for a new approach

Payment fraud is not just a matter of end-user vulnerability – the unwitting consumer who clicks a link or the authorized push payment that disappears into the familiar ether after a fraudster impersonates a family member or friend via text message.

Payment fraud is not just a matter of regulation, where the “right” rules, or just “more” rules, will build an impenetrable wall of defense against bad actors.

Now, more than ever, the rise of online shopping and card transactions shines a spotlight on the fact that fraud marks the vulnerabilities of money mobility itself.

In the digital age, we all want funds to be moved from one account to any account regardless of who the payer or payee may be – and often these funds are moved across a number of financial institutions and payment instruments as varied as cash, checks and digital wallets.

The weaknesses that exist with the fraud controls around money “into” the system are crucial.

To that end, and as reported in Ars Technica, online fraudsters have become increasingly bold, with card testing and other schemes on the rise. The site described one example of a wave of fraud enacted against a small Kansas-based firm, swamped by “card testing.” And if so, the scammers used purchases on the merchants’ websites, some as small as a few cents, to test the validity of debit card numbers.

The article focuses on Ally Bank, but the problem is endemic to the financial services arena in general. And not surprisingly, call centers are flooded with calls from consumers who are alarmed and worried about the costs – waiting on hold for hours to be helped.

PYMNTS own data shows that cards are indeed the favorite target of fraudsters, at least at the moment, with 11% of consumers surveyed saying they had experienced fraud in the last 12 months.

As many as 29% of respondents said they would be inclined to switch banks if they felt fraud incidents had been poorly handled by their financial institution (FI). All of this puts the onus on FIs to leverage fraud detection technology that also has better decisions built in to enable money mobility that is secure right at the “cash in” stage.

Also read: PYMNTS Intelligence: Fighting fraud while ensuring money mobility

In a recent PYMNTS interview, Karen Webster of PYMNTS spoke with Ingo Money Executive Vice President and Chief Product Officer Lisa McFarland and Senior Vice President of Payments Dennis Mullin. And in that discussion, executives noted the complexity of the connections — the nuts and bolts that make it possible to move money anywhere, where incoming funds can be received from any account.

Read more: Complex money mobility made easier with smart partners and strong platforms

Ingo Money CEO Drew Edwards has highlighted in this area that account issuance has been hampered in the past by the specter of fraud, where FIs and FinTechs have limited issuers’ ability to offer accounts to their entire consumer base. In just one example, it is conceivable that check services are made available to direct deposit customers who have been through at least two payment cycles with FI. That demographic tends to be less than 30% to 40% of the account base, Edwards said in a recent interview.

By describing how advanced technology can strengthen money mobility at first contact and, by extension, can expand access to financial services for the general population, Ingo Money announced in May the availability of its Inbound Digital Transfer and Risk Services.

The service uses device-related attributes spanning the location where a transaction takes place, the consumer’s behavior when interacting with the website or app, and account-related details to stop fraud risk in the first moments of contact with the FI or FinTech.

The decision at the moment for account funding may be among the best lines of defense against fraud which, after all, cannot harm financial services if they cannot access the ecosystem in the first place.