The constant innovation from the UK fintech industry means there are new ways for consumers to access financial services arriving all the time. We’ve seen digital payments, mobile banking and online banking over recent years, and it’s not slowing down, with fintech businesses still delivering a faster and more convenient experience all round. However, although these innovations are great for convenience, they also open up more opportunities for increasingly sophisticated financial crime.
As fraud techniques continue to evolve, UK fintech businesses now require reliable fraud prevention services that are able to spot any suspicious activity, verify customer identities, and protect against any financial losses, all without creating more time-consuming processes and unnecessary friction for legitimate customers.
This means that choosing the right fraud prevention services needs to factor in how a business can:
All of these features, as well as being able to detect fraud, need to be considered in a highly competitive industry. Choosing the right technology can make a significant difference to how successfully a business can run an efficient and trustworthy business as part of carrying out financial crime prevention.
It’s common for Fintech businesses to operate via digital channels, without the need for as many face-to-face interactions, thereby supporting convenience and scalability. However, the lack of face-to-face meetings can also create vulnerabilities that criminals can try to exploit.
Common fraud risks facing UK fintech businesses include:
If any of these threats are successful, it can often leave fintech businesses exposed to huge financial losses, more and more regulatory scrutiny, and, not to mention, the reputational damage it can cause.
For regulated firms, fraud prevention also forms part of wider financial crime risk management. Having appropriate controls in place will help businesses assess risk, identify any suspicious customers, and meet all relevant compliance obligations.
This means that a truly effective fintech fraud prevention service should offer support for both fraud detection and wider compliance processes, to create a widely effective system for businesses identifying risk.
The best fraud prevention services for UK fintechs should combine a mix of being able to identify customers, detect fraud, conduct screens for financial crime, plus ongoing monitoring.
Rather than relying on individual checks, businesses should look for a connected approach that supports fraud prevention throughout the customer lifecycle.
A strong fraud prevention solution shouldn’t have to rely on individual checks, instead opting for a more connected approach that supports fraud detection and prevention throughout the entire customer journey. This should include:
The exact combination a business opts for will depend on their specific business model, the customer base they have built up and any regulatory requirements. It may be necessary for businesses to combine specialist transaction fraud detection with wider AML and compliance technology.
The overall aim is to arm compliance and risk teams with the necessary information to support them in identifying threats, reducing any manual processes in place and making more informed decisions, which can be accessed via a clear and consistent audit trail.
It’s important for a fintech business to understand the specific risks associated with their own products, customers and operations. Here are a couple of examples of how needs can differ:
A digital payments provider may prioritise:
Whereas an online lending platform may choose to pay closer attention to:
This shows how, even within the same industry, a fintech company’s needs can be very different. For those fintech businesses onboarding corporate customers, Know Your Business (KYB) checks tend to take centre stage so that they can better understand ownership structures and identify potential financial crime risks.
For all fintech businesses, it’s beneficial to consider your own customer volumes, transaction types, geographic exposure, and existing compliance processes before you can start to evaluate providers.
This will ensure that the chosen services are better equipped to address genuine operational risks, as opposed to bringing in unnecessary complexity or duplicating existing processes.
Having a reliable identity verification process in place is one of the foundations of effective fintech fraud prevention.
It helps to prevent criminals using stolen personal information, synthetic identities, or fraudulent documents in order to open accounts and ensures that people are who they say they are.
Effective fintech KYC verification needs to offer reliable checks, using trusted data sources, in order to perform digital identity checks, confirm document authentication, and use biometric technology to help establish customer legitimacy, as well as offering the ability to carry out additional checks on customers deemed at a higher level of risk.
SmartSearch's KYC solution combines electronic identity verification, document checks, facial matching and liveness technology together to offer financial services businesses the ability to strengthen their processes for onboarding customers.
For those fintechs working with corporate customers, SmartSearch's KYB checks can also offer support with company verification, beneficial ownership identification and wider business risk assessment, meaning all areas are covered.
For those businesses that are transaction-focussed, digital banks or who are dealing with providing payments, effective fraud prevention needs to extend beyond the customer onboarding stage.
A customer's risk level can change at any time during the relationship; they can be added to a sanctions list or appear in adverse screening lists. This, on top of the fact that fraudulent activity can still take place even after a legitimate account has been opened, means ongoing monitoring is of particular importance.
At any stage of the customer journey, specialist fintech fraud detection services can help businesses to spot signs of potential fraud; unusual payment patterns, unexpected transaction volumes, and suspicious account activity are just a few of the indicators that can help identify fraud.
Part of the evaluation process of these specialist services should consider how quickly the technology can analyse transactions, identify behavioural changes or generate alerts. This will form an important factor in the decision-making process of which is the right tool or service for you and your business needs.
If you’re after a solution which offers additional device intelligence, behavioural analytics and transaction risk assessment, these capabilities may affect which option you choose, if added protection forms a large part of your monitoring needs. As long as these specialist capabilities are able to work alongside any existing identity verification and AML processes already in place, organisations will be able to build a more complete understanding of customer risk.
Ensuring that AML and fraud prevention operate together means fintech businesses are able to understand whether or not customers or organisations present a financial crime risk, even in situations where no fraudulent transactions have been identified.
The checks that need to be carried out involve those that see if a customer is on a sanctions list, if they are or have become a PEP (politically exposed person), or if they are appearing in adverse media sources, all of which help to identify if they require further investigation.
Strong fraud prevention solutions should offer these checks to be incorporated into your existing workflows, avoiding any disconnected systems.
SmartSearch's sanctions and PEP screening solution supports financial crime risk identification by having all of these checks in place, in addition to providing ongoing customer monitoring. And, when high-risk customers are identified, enhanced due diligence provides extra information which can support with making more efficient onboarding and compliance decisions.
Fintech businesses work in a fast-paced environment, so they need to be able to effectively balance providing fraud prevention that works with a quick and convenient digital service.
Long-winded verification processes, clunky manual checks, and repeated document requests can delay the onboarding process for legitimate customers.
This is where automation can help; an effective solution should enable straightforward applications to progress efficiently, while simultaneously flagging any higher-risk cases for further investigation.
Another thing to consider when searching for the right solution is how false positives are dealt with. It’s often the case that excessive alerts can start to overwhelm compliance teams and significantly delay genuine customer journeys.
Therefore, you need fraud prevention software, as a UK fintech company, that supports configurable risk rules, seamless automated screening and efficient case management, all of which help compliance teams to focus where they need to most.
Fraud prevention needs to be a factor throughout the whole of the customer journey, and not just at the onboarding stage.
Risk profiles can change, and once legitimate accounts can become vulnerable to an account takeover or to some other fraudulent activity.
Effective fintech fraud prevention services should be able to alert companies of any new risk factors, and, depending on the provider, this may also involve such capabilities as:
SmartSearch's ongoing monitoring solution is there to help businesses be aware of any changes to a person’s risk status, whether that’s via fraud detection or ongoing monitoring via sanctions checks, for example.
By combining specialist transaction fraud monitoring with ongoing customer checks, fintech businesses will always be aware of an emerging threat.
Scalability is a huge factor for a growing fintech business, and the chosen fraud prevention technology needs to be able to keep up and adapt, supporting a growing customer base, transactions, and operational complexity.
The same solution may not work for a small fintech company as it does for a larger one; the level of efficiency needed will change as a business starts to expand into new markets, with different financial products to offer.
Businesses will need to check whether their chosen fraud prevention service is able to scale with them or if it will just result in additional administrative work. Integration can help with this, as having the ability to combine new and existing systems seamlessly will reduce disruption, onboarding, and disconnected systems that can be time-consuming. Successful API connectivity can help businesses create more consistent risk assessment processes.
Security is also a huge concern for many fintech companies, so providers should also demonstrate secure data handling and clear processes for managing sensitive customer information.
SmartSearch offers API integration capabilities that allow businesses to incorporate everything from identity verification to AML compliance for fintechs into their existing tech stack.
For many companies, the extent of the technology capabilities is important, but fintech businesses should also be mindful to evaluate the effectiveness of a provider and how well they will be able to support their specific operational requirements.
Before choosing a fraud prevention service, businesses should consider:
Wherever possible, organisations should use representative customer journeys and risk scenarios they've faced to thoroughly test out solutions they’re interested in. The success rates of testing the quality of alerts, integration, and manual review requirements will help to determine your appropriate solution.
Demonstrating how customer risks have been dealt with is a must for regulated fintech businesses. Having clear audit trails and reporting abilities can quickly show what checks have been completed and why certain decisions were reached
A strong solution should maintain the following:
These all result in having more consistent risk-based procedures that, in turn, help to support internal investigations, whilst also offering evidence that can be used during regulatory reviews.
Having connected systems is a huge plus point; no more siloed solutions and disconnected workflows; instead, administrative tasks are reduced and a clearer structure is in place.
Choosing fraud prevention services for UK fintechs means putting in place a solution that addresses specific risks for the industry, whilst still providing effective onboarding for customers and trustworthy compliance workflows.
Basic fraud detection capabilities are no longer enough, and businesses should consider how verifying ID, and carrying out checks for KYC, AML screening, transaction monitoring, and ongoing risk assessment will all combine to work together.
Having the right combination will result in fintech companies being better equipped to find suspicious activity early, reduce operational inefficiencies and to ensure their customers are continually protected, even as they scale and grow.
The aim of SmartSearch is to help financial services businesses strengthen their fraud prevention and compliance processes. This is done via a range of methods, including digital identity verification, KYC and KYB checks, PEP and sanctions screening, enhanced due diligence and ongoing customer monitoring. These integrated capabilities work with existing workflows, enabling fintech businesses to become better at managing financial crime risk, while still building a more coherent and connected process.
Discover how SmartSearch supports financial services businesses with streamlined AML and compliance checks, or explore our fraud prevention solutions to discover the ways your organisation can start to strengthen its protection against financial crime.