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Fighting Fraud in a Fintech World

Published: February 8, 2019 by Brittany Peterson

Professionals are working in office, gathered around a tablet.

Innovation and technology have opened new doors of possibility for banks, credit unions and other financial industry organizations. It’s ushered in a new era of financial services products and capabilities within the digital ecosystem – creating more convenience and a better experience for consumers. And we have the plethora of fintech companies to thank for that.

But with new pathways to access financial accounts and information via digital platforms, opportunity has also been created for criminals to implement sophisticated fraud strategies, harming the financial services industry, and more importantly, consumers. In fact, according to recent findings from our Global Identity and Fraud Report, 55 percent of businesses globally reported an increase in fraud-related losses over the past 12 months – particularly account opening and account takeover attacks.  

So, with all of the advancements that fintech companies provide, how can they ensure they’re one step ahead of the fraudsters? We sat down with Kathleen Peters, Experian’s senior vice president and Head of Fraud & Identity, to discuss how fintech companies can effectively position themselves for success in this ever-changing fraud landscape.

How are businesses responding to the dynamic fraud threat?  

Based on the findings from our report, it’s clear businesses recognize the urgency of the matter and are taking steps to actively fight fraud. In the last 12 months, over half of businesses globally made significant investments in fraud management budgets.

However, despite the increases in budgets, we are seeing that fraud losses continue to grow year over year. This means that organizations, including fintech companies, need to ensure they have a complete understanding of how fraud impacts their business by looking at the problem holistically.

What are some of the advantages fintech companies have over traditional financial institutions when it comes to fraud?

With an increase in the volume of data breaches, we have to assume all personally identifiable information, such as name, addresses, date of birth and Social Security number, has been compromised. And with so much of our lives cemented in the digital ecosystem, we are left vulnerable to fraudsters. Many criminals are relentless in their search for weaknesses in the system, never giving up.

The advantage that many fintech companies have is their agility and customer-oriented approach. Organizations across the board need to be nimble and adopt new fraud prevention strategies to stay ahead of the criminals. But more importantly, these new strategies cannot negatively impact the customer experience. According to our report, the two most important elements for the consumer online experience are security and convenience.

What steps can fintech companies take to increase consumer trust?

Trust is built on a company’s ability to protect people’s identities and create an enjoyable experience. We believe a multi-layered approach is key to achieving success. A silver bullet for fraud prevention and identity management doesn’t exist, but the use of multiple strategies can provide a safe and convenient online environment.

Advanced data and technology, such as biometrics, device intelligence and identity tokenization, can now seamlessly be integrated to confidently authenticate customers. We know that consumers appreciate security they can see – especially physical biometric measures like a fingerprint or voice recognition. But when these methods are layered with additional, passive authentication capabilities, organizations can deliver the secure and convenient experience that consumers are truly looking for.

To read the full Global Identity and Fraud Report, click here.

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In today’s digital lending landscape, fraudsters are more sophisticated, coordinated, and relentless than ever. For companies like Terrace Finance — a specialty finance platform connecting over 5,000 merchants, consumers, and lenders — effectively staying ahead of these threats is a major competitive advantage. That is why Terrace Finance partnered with NeuroID, a part of Experian, to bring behavioral analytics into their fraud prevention strategy. It has given Terrace’s team a proactive, real-time defense that is transforming how they detect and respond to attacks — potentially stopping fraud before it ever reaches their lending partners. The challenge: Sophisticated fraud in a high-stakes ecosystem Terrace Finance operates in a complex environment, offering financing across a wide range of industries and credit profiles. With applications flowing in from countless channels, the risk of fraud is ever-present. A single fraudulent transaction can damage lender relationships or even cut off financing access for entire merchant groups. According to CEO Andy Hopkins, protecting its partners is a top priority for Terrace:“We know that each individual fraud attack can be very costly for merchants, and some merchants will get shut off from their lending partners because fraud was let through ... It is necessary in this business to keep fraud at a tolerable level, with the ultimate goal to eliminate it entirely.” Prior to NeuroID, Terrace was confident in its ability to validate submitted data. But with concerns about GenAI-powered fraud growing, including the threat of next-generation fraud bots, Terrace sought out a solution that could provide visibility into how data was being entered and detect risk before applications are submitted. The solution: Behavioral analytics from NeuroID via Experian After integrating NeuroID through Experian’s orchestration platform, Terrace gained access to real-time behavioral signals that detected fraud before data was even submitted. Just hours after Terrace turned NeuroID on, behavioral signals revealed a major attack in progress — NeuroID enabled Terrace to respond faster than ever and reduce risk immediately. “Going live was my most nerve-wracking day. We knew we would see data that we have never seen before and sure enough, we were right in the middle of an attack,” Hopkins said. “We thought the fraud was a little more generic and a little more spread out. What we found was much more coordinated activities, but this also meant we could bring more surgical solutions to the problem instead of broad strokes.” Terrace has seen significant results with NeuroID in place, including: Together, NeuroID and Experian enabled Terrace to build a layered, intelligent fraud defense that adapts in real time. A partnership built on innovation Terrace Finance’s success is a testament to what is  possible when forward-thinking companies partner with innovative technology providers. With Experian’s fraud analytics and NeuroID’s behavioral intelligence, they have built a fraud prevention strategy that is proactive, precise, and scalable. And they are not stopping there. Terrace is now working with Experian to explore additional tools and insights across the ecosystem, continuing to refine their fraud defenses and deliver the best possible experience for genuine users. “We use the analogy of a stream,” Hopkins explained. “Rocks block the flow, and as you remove them, it flows better. But that means smaller rocks are now exposed. We can repeat these improvements until the water flows smoothly.” Learn more about Terrace Finance and NeuroID Want more of the story? Read the full case study to explore how behavioral analytics provided immediate and long-term value to Terrace Finance’s innovative fraud prevention strategy. Read case study

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