You don't have javascript enabled.

Exploring the interplay of data, risk, and fraud at Fintech Week London

The growing focus on data, risk, and fraud is bringing about a transformative change in the financial technology sector.

The integration of advanced data management and risk mitigation strategies is creating a synergy that not only fortifies traditional financial processes but also introduces new, robust mechanisms to combat fraud, safeguarding the digital economy against ever-evolving threats.

  • Marina Mouka
  • June 27, 2024
  • 5 minutes

At Fintech Week London’s flagship conference, a panel on “Data, Risk, and Fraud” shed light on three of the most pressing issues in the financial technology sector.

Moderated by Gina Clarke, Europe Content Director at Money 20/20, the session featured insights from Zahra Shah, Board Advisor and Co-Founder at NexaQuanta, ICO, TeamUp Ventures, and Seers, and Karen Zhang, Fintech Lead & VC Partnerships at Google Cloud UK.

Their discussion explored the fundamental links between data management, risk mitigation, and fraud prevention in today’s digital economy.

The importance of these topics is evident from the statistics. Online payment fraud losses are projected to exceed $206 billion over the next five years, according to Juniper Research. Moreover, the Global Data Protection Index reveals that 65% of global enterprises have experienced major data breaches in the past two years.

These alarming figures not only framed the conversation but also highlighted the urgent need for robust data security and fraud prevention strategies.

Connecting the dots: Data, risk, and fraud

The discussion kicked off with a deep dive into the connections between data, risk, and fraud.

“With the explosion of digital assets and data usage, there’s an inevitable link between these elements,” noted Zhang. The increasing volume of digital transactions naturally intensifies these connections, highlighting the need for companies to build resilient systems to manage evolving threats.

“Companies are focused on building robust systems and infrastructures to manage these challenges,” she added.

Shah reinforced this view, stressing the importance of data efficiency in risk management. She pointed out that “organisations need a unique data strategy because different types of data require different governance. The ICO reports that 80% of data breaches are due to GDPR privacy issues, and 60% of these are because of simple mistakes like not updating passwords or using two-factor authentication.”

Shah also stressed the importance of technical measures and continuous employee training to keep pace with evolving regulations and prevent human errors.

Regulations fuelling innovation

While regulations are often seen as constraints, they can also drive innovation. Shah praised the UK’s principles-based approach to AI regulation, which she compared to the EU’s risk-based methodology.

“The UK’s AI Regulation Bill, currently in Parliament, could set a global standard by encouraging innovation while ensuring safety. This approach is more adaptable to the rapid advancements in AI technology,” she explained.

Zhang pointed out that compliance with regulations like GDPR and the upcoming Digital Operational Resilience Act (Dora) is crucial for fintech companies aiming for global expansion.

“Regulations provide a framework that can actually enhance innovation. For instance, Monzo is leveraging these frameworks to ensure their expansion into new regions like the US is secure and compliant.” Following these regulatory frameworks not only protects companies but also builds customer trust, which is crucial in the digital age.

The financial imperative for compliance is stark. Data from the European Banking Authority (EBA) shows that non-compliance with regulations such as GDPR can lead to fines of up to 4% of the annual global turnover. The EBA also notes that comprehensive regulatory frameworks can reduce fraud incidents by up to 30%, reinforcing the panel’s points on the benefits of regulations.

Crafting a resilient future

The discussion then moved to practical strategies for building resilience against data breaches and fraud. Zhang recommended integrating site reliability engineering practices early on. She advised that “startups should consider multi-tenancy, regional scalability, and latency from the beginning. Partnering with vendors can provide the necessary guidance to build scalable and repeatable frameworks.”

Shah added that focusing on responsible AI and privacy-by-design practices from the beginning is essential, noting that “it’s tough to fix issues later, especially with large language models that may have biases. Starting with responsible AI practices ensures long-term sustainability and trust.”

She also highlighted the role of AI in enhancing fraud detection and KYC (Know Your Customer) processes. “AI can speed up data analysis and automate processes, reducing false positives and improving the detection of suspicious activities,” she explained.

Supporting the speakers’ points, a report by Accenture states that AI could help financial institutions save up to $31 billion by 2025 through improved fraud detection and operational efficiency. Additionally, AI-driven KYC processes can reduce customer onboarding time by up to 90%, according to a report by the World Economic Forum.

Karen Zhang concluded by emphasising the need for continuous education and internal support to keep up with rapid technological and regulatory changes.

“Organisations must support their employees better, possibly using AI to search and comply with policies. It’s about balancing innovation with caution, ensuring that teams are well-equipped to handle the evolving landscape,” she said.

In wrapping up the discussion, the panellists agreed that the fintech sector stands at a crossroads where robust data management, strict regulatory compliance, and innovative risk management strategies converge. As digital transactions continue to rise, so does the need for fintech companies to adopt comprehensive and forward-thinking approaches to data, risk, and fraud.