Smart Automation and the Cybersecurity Network Effect

Corporate fraud may be on the rise, but so is highly aggressive corporate fraud-fighting.

As Nithai Barzam, chief operating officer at cybersecurity FinTech nsKnox, told PYMNTS for the “Executive Insights Series — Top of Mind,” he’s focused on the hurdles his clients must clear every second of every day because, like those tasked with defending it, digital fraud never sleeps.

“I think finance leaders understand that manual processes are no longer safe and no longer effective,” Barzam said, pointing to the array of new challenges, from remote work to new regulations on anti-money laundering, anti-terror financing and sanction screening.

But with digital payments volumes soaring and digital banking growing rapidly, Barzam zeroed in on issues surrounding onboarding, processing update requests and invoices, and making payments more secure.

“This is where they want to be automating because they onboard many new suppliers, they’re shifting from one to another to expedite their time to market, and sometimes companies are required to make payments quickly, otherwise, they lose the supplier.”

Not only should protection of payments be split into incoming and outgoing, he said, but account validation is definitely something he thinks needs to be automated, a fix he said that typically takes care of part of the problem, especially as social engineering fraud gets sneakier.

“You want something that protects data when it’s at risk, and you want something that monitors your payments when they go throughout the journey,” he said, adding that “when you automate those, you get central control and protection throughout the journey.”

See also: Instant and Automated Payments Make Tempting Targets for Fraud

Very Verifiable

That covers the outgoing aspects of the payment, but the incoming side of the equation is harder to control, and nsKnox is on a mission to inject more validation into that process.

“At a minimum, you want to make sure that when you provide your banking details, it’s in a secured way, and more important than just secured, it’s in a verifiable manner,” he said.

Noting that bank account certificates that carry accurate, verifiable information close the loop by providing feedback that details are correct, “you wouldn’t need to verify account ownership anymore because everybody would get only verifiable details,” he said. “I think this is a bit of the revolution that we’re out there to implement.”

Doing this requires ubiquitous automation for a data-rich (and target-rich) environment.

Barzam said every such change requires a network effect that must start somewhere and build momentum. Once that begins, even companies with masses of customers and suppliers can achieve higher levels of certainty that money is flowing to and from legitimate sources.

“I think it starts with protecting specific organizations, which in turn protect their vendors and their customers, and it moves on to banks we’re working with that are going to offer this type of service to their customers.” That’s the new security network effect in action.

See also: Auto Verification of Bank Account Owners Is Key to Sanctions Compliance

Security in the Fast-Fraud Era

Asked how this plays out as digital moves toward real-time irrevocable payments, including cross-border and many other payment pathways, Barzam sounded a note of caution.

“From a fraudster’s standpoint, this may mean an opportunity for faster fraud, because the less time you have for diligence, the less time you have to question the identity and the accuracy or the details because it’s real time,” he said.

“Then it’s more likely you’re going to fall victim and only find out about it after the fact,” Barzam added.

To stop that happening, here again, automation outruns manual processing and outmaneuvers the fakes and forgeries that often get onboarded by finance teams who are deluged.

“First it’s about reducing the risk of fraud, mitigating this increased opportunity for fraud with better technology and a better process that’s going to keep you more secure and protect your payments,” Barzam said. “Secondly, and oftentimes as important, it’s going to increase operational efficiency,” because no one regardless of size can afford large fraud losses.

And while fraudsters will gladly rob a nonprofit helping the needy, their preferred targets today are big corporations moving tens or hundreds of millions of dollars in and out routinely. That’s where the cybersecurity network effect needs to start, and the good news is that it has.

Without mentioning names, Barzam said, “Some of the world’s leaders in software, in semiconductors, in manufacturing, in financial services and insurance are already using these types of solutions to protect their payments. It’s about continuing the wave and the network effect with these types of companies and their counterparties, be it customers on one side, vendors on the other, that I hope and believe will drive the adoption.”