Managing risk is crucial to achieving success in the Fintech industry. Solid employs a number of tools to manage risk, in the KYC and KYB space as well as transaction monitoring. Additionally, we recommend taking advantage of the following tools to limit the risk of fraud liability to your program.
- Identity Verification (IDV) is an essential tool to minimize the risk of fraud and identity theft. By verifying the identity of users, Fintech programs can ensure that their services are being used by legitimate individuals. IDV performs document verification, facial recognition, and biometric checks can help to prevent fraudsters from using fake identities.
- Monitoring reports of ACH returns, debit pull chargebacks, and reviewing transactions for fraudulent activity are also important measures to manage Fintech risk. ACH returns occur when there is an issue with a transaction, such as insufficient funds or a closed account. By monitoring these reports, Fintech companies can identify any patterns or trends in returned transactions and take appropriate action to prevent future returns. Similarly, debit pull chargebacks can be monitored to identify any unauthorized transactions, which can be indicative of fraudulent activity. Reviewing transactions for fraudulent activity involves analyzing transaction data to identify any suspicious behavior, such as unusual transaction amounts or locations.
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One good practice to reduce risk is to gradually increase limits for accounts in good standing. Programs can leverage program-level limits on form factors and account-level limits for payment types to gradually increase limits as accounts demonstrate that they are low risk. Depending on their risk tolerance, card-level spending limits can also be used to contain risk.
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Another good practice is to monitor incoming credits. For example, flag a transaction where the amount is over $10,000 and there is no mention of the business or person related to the transaction. This may indicate that the payment was not intended for the credited account, and the program could block the account and ask the customer about the nature of that specific transaction before unblocking the account.
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Depending on the volume and velocity of transactions, programs can monitor them using third-party transaction monitoring tools, which the program can contract with directly if they wish. Please note that using transaction monitoring tools would generally only add value if there are at least 1000 transactions a day. If the transaction count is lower than that, it would be more cost-effective to simply use the filters available on the dashboard to monitor incoming and outgoing transactions.
Please note that while these pointers can help, crafting a plan to contain fraud is a continuous process. Programs need to learn, adapt, and optimize their thresholds depending on observations as they scale to ensure they strike a compatible balance between growth and risk goals.