Two types of Fintech scams and what users can do about them

Founder and CEO of MovoCash, Inc.where he combines the best of banking and blockchain through MOVO, a highly secure payment card platform.

Aspects of the fintech industry are in decline (e.g. stock prices and valuation), and one reason could be a lack of security and an all-out attack by fraudsters (fraudsters, bad actors, etc.). A downturn in the economy doesn’t help either.

Here are two problems and what users can do about them today, in a simple way.

1. First, fintech fraud can happen when fraudsters can sign up and use their app accounts to steal your money and launder it. Let’s stop the bad actors at signup.

2. Second, fraud can occur when valid users are defrauded by providing their primary credit or debit card information to payment providers they do not know well (fraudsters as providers). Let’s not give anyone the keys to our house or to our fintech balances.

Here are some use cases that can help the non-expert better understand these security issues both at registration and during card use. See the suggested tips below for ideas on how to stop scammers.

Use Case #1: Find out if your fintech uses “push” and/or “pull” techniques to move your money in and out of your fintech account.

In a pull format, a fraudster can impersonate you from the fintech app (using your stolen credentials) and access your bank account via pull access tools that act as the “middle man” between the fintech app and your bank. They can then send your money into their fake fintech accounts, where it can be sent and used freely.

That’s a lot of exposure. In a push format, the sender of money (you) must be inside your trusted financial institution’s system/portal (your bank) and have full and secure access to all your money. You can then confidentially send (push) it into your fintech account. That’s much harder for a scammer to achieve and means he’s far more likely to be you and not a bad actor.

Hint: Press only for (look for) push.

Use Case #2: Ideally, you should never give your primary card information (16 digits, expiry date and CVC) to anyone online or offline, be it card-on-file, for a subscription, membership, dinner or to pay for a product or service. Especially where the supplier has the ability to charge you more than you initially decided to pay them, or the ability to charge you again at the end of a period, even after you told them to stop. Unfortunately, suppliers can also be scammers.

Hint: Look for multipurpose virtual cards that disconnect the main card and its balances. These secondary cards can be instantly created and funded for the exact payment amount and added to a digital wallet (eg Apple Pay, PayPal or similar) for hands-free convenience without a physical card in hand. This gives you options and better control over your money when you send or use it.

Another approach that can help is to use PayPal to protect your primary credit or debit card, but even PayPal can have issues that can put users at risk of fraud. Fraud can affect both buyers and sellers, according to government studies.

Use Case #3: The harder it is to sign up, the better! I know it’s hard to accept. But if a fintech lets you in too easily, then your assets aren’t as safe as they could be, as bad actors may be looking to join as users and cause problems for you. Yes, it is a pain to prove who you are sometimes, but without it, your money is not as safe and secure. And it is mainly by registration. Just make sure your fintech is well-known, highly rated and FDIC insured so you can share your personal information with confidence.

Hint: Don’t give up just because fintech wants to know so much about you. It’s actually a good sign and in your best interest!

Use Case #4: Make sure your fintech is consistently monitoring activity to look for potentially fraudulent activity and then take action where necessary. If you are a good user and they raise an issue with you, don’t get upset. In the long run, such security works to your advantage and the entire community.

Hint: Expect scrutiny along the way; that’s a good thing.

Use Case #5: Finally, don’t be lax about card use just because you think the fintech and/or the underlying bank will simply cover you in the event of fraudulent activity. They may cover you, but there are situations where they won’t (eg if you’re slow to report the fraud), and the hassle factor is huge when you have to change every legitimate and trusted card-on-file relationship you have . In addition, there are differences in the protection guarantees between credit cards and debit cards that may surprise you.

Hint: Do not take unnecessary risks with your card information; it may eventually come back to bite you.

Per Bankrate.com: “Credit cards offer some fraud protection benefits that debit cards don’t. Almost all of today’s top credit cards offer zero fraud liability for unauthorized charges, meaning you won’t owe a penny on a charge that’s determined to be fraudulent. Debit cards also limit your fraud liability, but requires you to report a lost or stolen card within two business days to limit your liability to $50. If you report after two business days but before 60, your liability increases to $500. If only your debit card number is stolen and not the card itself, You are not responsible for unauthorized charges, as long as you report them within 60 days of receiving your statement.”

Conclusion: Some of the potential solutions to fintech fraud problems are obvious and available today, as pointed out above. (Disclosure: My company provides such fintech solutions.) Once addressed across the industry, fintech has a bright future with a seemingly endless set of features, functions and benefits lined up. Choose wisely and be aware of the use cases and liability protection discussed above.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice regarding your specific situation.

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