Flexibility And Orchestration Define Future In Fight Against Fraud

For all the time, effort and energy put into fighting fraud in its various forms, the reality is that there’s no magic bullet to stop it. As Trulioo Chief Operating Officer Zac Cohen told Karen Webster in a recent Masterclass conversation, fraudsters aren’t only a forever feature — they are also constantly raising their game level.

“The one truth we see is that you never can underestimate fraudsters, ingenuity and innovation, and that’s what you have to address,” Cohen said.

However, on the other side of that coin is a corollary rule: Never underestimate the innovators space. They’re also consistently leveling up their game and “setting the pace” to drive the security segment forward. Innovators are fighting off the fraudsters and simultaneously creating paths for individuals to access the digital economy.

“At the end, we all have the same goal, right? It’s to create, frankly, a secure environment where consumers like you and I can transact,” Cohen said. “That challenge is true in a lot of life and in business: If you’re not constantly trying to get better, you’re falling behind.”

And staying ahead, he said, means being ready to solve short-term problems while building solutions that are flexible enough to tackle the problems one hasn’t even imagined yet.

Fighting The Flexibility Of Fraudsters

When fraudsters find a strategy that works, Cohen said, they aren’t shy about applying it in new places to see if they can get a similarly successful result. Case in point: the kind of onboarding frauds that used to mostly go after individual consumers. Sometimes, he said, that would mean stealing a consumer’s credentials and using them to open fraudulent accounts or taking a few different pieces of consumer data to build a fictional synthetic identity.

And as Cohen noted, fraudsters have realized that in many key ways, businesses and legal entities are “people” too. They can leverage similar tactics using stolen business data to commit fraud via fraudulent business entities.

“As the digital economy has grown, many individuals have chosen to create legal entities, and there are a bunch of micro-merchants that are facilitating markets that weren’t available before,” Cohen explained. “So now we’re seeing all the bad actors and operations and use cases and ways to fool the system that we’ve seen on the consumer side shifting over to the business side.”

It’s still more prevalent on the personal account side, he said. Still, it’s quickly growing on the business side because companies don’t have the same level of organized data sources to recognize business identity fraud when it happens.

There are mechanisms to counter this, according to Cohen. There is the bad, but effective, method of building an incredibly high-friction onboarding process to scare away fraudsters. The problem is that legitimate consumers are also scared away. Or, he said, they can shoot for a risk profile that balances security and a smooth user experience, both at the initiation stage and over time. Leveraging these different layers and data markers in different processes allows organizations to start doing what banks call perpetual know your customer (KYC), which orients security processes around specific events.

“When we really dial down on how the user journey works and what different scenarios exist, we can formulate really effective tools where you don’t have to sacrifice a well-defined and excellent customer experience,” said Cohen.

The Flexibility Factor

Where to start in that process toward building a better, more balanced fight against fraud? Cohen would advise adopting tools that are just as flexible as the fraudsters are. Rolling out a hard-coded point solution both runs the risk of a regulatory change setting “an entirely new set of rules tomorrow” — not to mention the fact that fraudsters will always adapt.

“As a business operating in this space, when you’re trying to choose which technology to use to satisfy your user onboarding, your compliance, your risk profiling, your transaction monitoring, everything — the most important piece of advice we can offer is to adopt flexibility,” Cohen said. “Are you choosing a single solution that is supposed to work forever somehow?”

Because the fact is, it won’t. The world will change. There is double the number of mobile users in the world today than there were 10 years ago. COVID-19 has almost entirely rewired consumers’ life patterns in the course of the last 10 months. Technology that can’t change with the world, said Cohen, will be left behind.

But as daunting as all of this can sound from the outside, Trulioo sits on the inside, where this is, in fact, a very exciting time. Regulatory compliance tech is exploding, biometrics are taking off, and corporate registration documentation is getting easier to digitize and move. And, most critically, orchestrations are vastly improving for what is on the horizon.

“Orchestration is where we are seeing a lot of innovation right now,” said Cohen. “So you can pick and choose all the different technologies you need, and continue to innovate in your own business and make sure that the regulatory technologies you have plugged in are doing the same.”