Three essential steps for fintech trust and safety

Three is a powerful number. Stalemates are broken with rock, paper, scissors. An understanding of the alphabet starts with ABC. Merely hearing "on the count of three" is likely to get your adrenaline pumping.

As it turns out, three is also a powerful number in the defense against financial crime. For fintechs to counter the rise in this unwanted activity, there's a trio of essential steps to follow when establishing an effective trust and safety operation.

The steps are:

• Agreement and planning
• Hiring and training
• Production and control

The case for these three steps cannot be overstated. In an ACI Worldwide report, the firm projected that financial crime is going to cost global banks and financial institutions more than $40 billion by 2027. More specifically, fintechs lose 1.7% of their annual revenue to fraud, according to Plaid.

Financial crime, as a growing and global threat, creates an urgency for businesses to set up effective trust and safety operations. It's even more critical when you look specifically at the fintech industry, where sensitive data is exchanged almost exclusively via digital channels. The challenge is compounded by the increasingly borderless nature of digital transactions, the ever-evolving regulations that surround fintech anti-money laundering (AML) and Know Your Customer (KYC), and the new fraud threat brought on through generative AI.

Currently, there is a lack of global consistency in KYC requirements and processes. Regulation and compliance can be very complicated in any one country, but matters only get more complex when you widen the scope and account for different regions.

Fintech fraud prevention and detection, data privacy and user safety are only going to become more important from here on out. Let's take a look at what makes a successful trust and safety operation — and the three steps that fintechs can follow to put one into practice.

Putting the trust in "trust and safety" for fintech companies

While fintechs may have inherent digital agility and aptitude, consumers remain more trusting of traditional financial services companies. According to Mastercard's report, The rise of open banking in North America, more than half of those surveyed said they strongly trust traditional banks with their data. Less than a third (32%) said the same about fintechs.

These trust gaps need to be bridged— and there is great incentive for fintechs to do just that. When customers trust a fintech, they are more likely to be comfortable trying out their products and services and sharing their own personal information. But know this: Trust is earned, not given. Fintechs need to leverage innovative technology and decisive strategies that protect client data and foster confidence.

Characteristics of a successful fintech trust and safety operation

Effective trust and safety operations bring together the best combination of people, processes and technology to eliminate downtime and keep pace with fraudsters. In particular, your operation should be:

• Adaptive: Fintech KYC efforts should be not only relentless, but also continuously evolving. Organizations must regularly verify customer identities in order to meet AML compliance obligations, and stay on top of the ways financial criminals try to slip past protocols. This highlights the importance of ongoing education and training for your team members.
• Intelligent: Faced with extraordinary amounts of data, deploy intelligent technology and processes that simplify the tasks at hand for your team members. Advanced KYC and identity verification features like two-factor identification, alongside various forms of AI and automation, can detect anomalies and defend against identity theft. AI-based anomaly detection, for example, can help brands analyze large datasets and identify unusual patterns that may indicate fraudulent activity.
• Comprehensive: End-to-end encryption and blockchain technologies can add layers of security that give your customers peace of mind and protect you from organizational threats.
• Scalable: Make sure your trust and safety operations grow with your brand ⁠— in numbers, and across geographies. An outsourcing partner with expertise in the fintech industry can help you to do this quickly and effectively.

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How to set up a fintech trust and safety operation

Brands don't always know where to start when they set out to establish a robust trust and safety operation. A capable partner who has been there before can help you to avoid learning lessons the hard way. In TELUS Digital's work with dynamic brands across the financial services and fintech ecosystem, the following three steps have become clear.

1. Agreement and planning

There’s no way around it: First you must understand the unique circumstances as a fintech. You need to be very clear about your business objectives and how they intersect with, or rather depend upon, trust and safety.

Understanding your objectives will help you identify the right key performance indicators (KPIs) to track in order to measure your success. For fintech trust and safety, this should include fraud detection accuracy and process handling time, among others.

An outsourcing partner can not only help you to map your KPIs to your overall business objectives, they'll also be able to help you plan what you need to get results. For one financial services brand, TELUS Digital introduced automation to offer decision-making guidance on refunds, identifying high-risk claims and more. The solution resulted in an improvement in customer satisfaction by 40% and a decrease in average handle time by 9%.

During the agreement and planning phase, it is also important to determine the AML, KYC and other regulations that your company must follow.

2. Hiring and training

Once you've understood your organization's needs, goals and KPIs, the next step is to establish or scale your team.

In all facets of trust and safety, background checks are a must, as are hiring processes that examine how candidates manage stress. At the same time, the borderless nature of many fintech firms means your team should be as diverse as the customers you serve.

Once team members are hired, industry-specific training curricula can strengthen their understanding of trends and the tactics they're defending against, as well as their ability to communicate with customers in a way that feels natural, empathetic and informed.

Given the complexity that is commonplace in the fintech industry, a searchable and accessible internal knowledge base can be invaluable. By storing information about your technology, brand, the industry, regulations and processes, your team members will be better equipped to solve any issues brought to them by your customers.

3. Production and control

At this stage in the development of your trust and safety framework, your security team will model different scenarios surrounding data breaches and other scams to systematically test your security by deploying state-of-the art tools and technologies for real-time monitoring, threat detection and anomaly detection.

Periodic security audits will help you identify potential breach points, flaws in your processes and regulatory compliance track record. At the production and control stage, it's all about being proactive. Root cause analysis, for example, is an important concept to put into practice. In conducting root cause analysis, a fintech can begin to understand the origins of an issue or pain point, and rebuild by developing new processes or bringing in new tools — like adding biometric verification to increase security.

Being proactive also involves developing incident response protocols that include procedures for identifying, reporting and resolving security incidents. Brands who take this seriously will conduct regular drills and simulations to test their plans.

Get proactive through partnership for fintech trust and safety

A partner can support fintechs' trust and security efforts by offering a "macro view" of the industry and providing additional context from what comparable industries are doing. In this regard, a partner with cross-vertical experience can suggest potentially unexpected ways to improve efficiency or innovative technology to help overcome trust and safety issues.

As the fintech industry continues to evolve, so too will the threats that companies face. While you can't predict the future, when it comes to trust and safety, a proactive approach is key. If you're looking for help establishing a trust and safety operation that mitigates risk and earns your customers' confidence, get in touch.