FinovateFall 2020: making the cost of compliance work for you and against the fraudsters
Some of the brightest minds in the digital identity business believe that making the cost of fraudulent activity prohibitively high is key to undermining the ability of criminals to profit from cyber-fraud.
“Eliminating all fraudulent accounts is an admirable goal, but perhaps unattainable,” writes Cameron D’Ambrosi, principal at One World Identity, and an upcoming participant in the Future Financial Crime roundtable at this year’s Digital FinovateFall. “Making it more expensive to create a fraudulent account than the profit generated by a fraudulent account is achievable. It will go the farthest towards meeting the goals of trust and growth teams alike.”
Making the cost of fraudulent activity prohibitively high is key to undermining the ability of criminals to profit from cyber-fraud
In a blog post earlier this year, D’Ambrosi put the case for digital identity in the context of the current global health crisis, seeing COVID-19 – and the social and economic response to it – as an accelerant of trends that had been in place before the onset of the coronavirus.
As D’Amborsi explains, in a world in which individuals are increasingly accessing an ever-growing array of digital platforms – on their own or under the influence of algorithms – distinguishing authentic users from digital-created fakes and imposters – is critical to a 21st century online experience that can be trusted. This challenge will be more intense because of the incentive around brands and businesses having to “go viral” to spread their content as widely as possible. Ensuring that customers are not conned by brands that are scams and that merchants are not fooled by customer-impersonating bots is a key task for digital identity companies today.
On the issue of digital identity and financial crime, Jas Randhawa, chief compliance officer for Stripe, underscores the rise and challenges of “newer fraud typologies”. Randhawa also dissects the opportunities for fraud in the current COVID-19 environment. He observes that the renewed volatility of the stock market during the global pandemic also provides fertile ground for fraudsters. Adding powerful incentives for merchants and other businesses to “go digital” in their response to lockdowns and work-from-home, leads to additional pressure on the ability of the identity management infrastructure – for institutions and individuals alike – to determine real, legitimate actors from fake or malevolent ones.
Randhawa will also be joining the FinovateFall conversation on Future Financial Crime. A 14-year veteran of financial crimes and compliance management – including six years with PwC – and a certified anti-money laundering (AML) specialist, Randhawa emphasises a few general themes from his experience in compliance: de-siloing decision-making, embracing technology, understanding the cyclical nature of identifying problems, developing solutions, and innovating as new challenges arise – then starting the whole process over again.
Randhawa’s example of Stripe is thought-provoking, given that the company is a digital-first entity. While that shields the firm from having to digitise in the middle of a pandemic, the company faces the task of securely onboarding a surge of businesses that had to suddenly made the decision to pursue digitalisation. Moreover, the company needs to thread the needle of keeping bad actors off the platform while not being so restrictive as to undermine its own goal of “growing the GDP of the internet”.
For Randhawa, the current circumstance likely represents a “new normal” as far as the innovation cycle in compliance is concerned. “We’ll have to keep whacking away at this problem,” he said during an online panel on Real Identity Validation in a Digital World earlier this year. He emphasises that creativity will be required in order to achieve an experience that is simultaneously the most seamless and the most secure.
Among the companies helping businesses and individuals cope with the new requirements of the “new normal” are firms like Jumio and SheerID. Both companies are Finovate alums forging innovation in the digital identity management space, and both are portfolio companies of venture capital firm Centana Growth Partners. Founded in 2015, Centana considers authentication and identity technology companies among its core competencies and the firm’s co-founder Eric Byunn will also join our conversation on Future Financial Crime.
“Authentication is of critical importance to a broad range of online and mobile applications across industries such as financial services, e-commerce, travel, and the entire sharing economy,” Byunn said four years ago when Centana acquired Jumio, making a statement that is all the more true today. He called identity “top-of-mind for companies” last fall when SheerID was named to the Deloitte Technology Fast 500.
Centana also has a more direct commitment to financial crime fighting than just its investments in digital identity innovators. The VC firm is also a backer of SpyCloud, a Finovate Best of Show winning start-up that specialises combating account takeover (ATO) fraud and recovering stolen credentials from the online criminal underworld or “dark web”. SpyCloud has recently raised $30 million in Series C funding. The round was led by Centana, featuring the participation of Microsoft’s venture capital fund, M12, as well as Altos Ventures, Silverton Partners, and March Capital Partners.
“SpyCloud’s approach to fraud prevention is helping businesses protect themselves and their customers at a time when threats are more pervasive than we’ve ever seen,” Byunn said when the funding was announced. “We heard from major financial institutions and a wide range of enterprises that SpyCloud’s solutions are critically important to their anti-fraud efforts.”
The fact that VC firms continue to plough money into companies that fight cybercrime – either directly like SpyCloud or indirectly by enhancing the identity management infrastructures we rely on – is a positive sign in and of itself. But in the context of winning the race against technology-savvy criminal adversaries, it’s a welcome indication that the money is flowing in an area where the challenge appears never-ending.
