In an interview with PaymentsJournal at the 2021 Money20/20 event, James Mirfin, Global Head of Digital Identity & Fraud Solutions at Refinitiv, spoke about how streamlined identity verification needs to be positioned as an offensive benefit and competitive edge when dealing with fraud and risk. The following transcript was edited and condensed for clarity.
How has your experience at Money20/20 been so far?
It has been really interesting. I think seeing the industry come back together has been great and seeing how there’s pent up energy for people doing things, which is exciting. I have [noticed] three key areas that I am seeing people talking about that I find interesting. If I talk at the lowest level first, [there’s] a big focus on the underserved and underbanked, which surprised me a little bit. That has been a theme I have heard here before. It is a theme of the industry. It surprised me that it’s still a real topic of conversation.
But the way people are thinking about it is very different. Now, they are producing solutions. They are really thinking about taking the best of what has been happening in digital with some of the neobanks and applying that to a different demographic and a different sector, bringing more sophisticated financial products to those previously underserved. So, that is exciting and I have heard that in a number of different areas, from vendors to providers to licensed players to a bit of fintech and financial services collaboration. To me that is exciting, and hopefully it makes a change in this market in particular and those underserved communities get a lot more help.
The second area, I think it is Dan Schulman at Paypal [who] talks about the democratization of financial services. There is a theme I am picking up on around that, which is… a lot of conversations around wealth and bringing more sophisticated wealth products to a different demographic and probably more mass-market consumers. I see a trend where they are leveraging digital capabilities to do that, making it more accessible [and] making more digital consumer experiences. That is really encouraging and a big shift in that conversation [from] two years ago when I was here.
The third [theme] is crypto, crypto, crypto. Every angle from crypto ATMs to platforms to wallets and, again, people talking about bringing crypto to the masses. That comes with opportunity, and it comes with challenges as well. There has been quite a lot. Obviously, the other thing is just changing types of products and the way they are going to customers, so buy now, pay later, where you basically bring credit to checkout, and products like that. There is a lot happening in the industry.
Do you believe underbanking is a major conversation now?
It is definitely a data and analytics driven play. So, I think the conversation I have not heard as many people talking about examples in other countries or examples of models, but I think the sophistication in the way they are approaching that problem is changing a lot. I won’t give away the secrets of where people are attacking this from, but they are using data from places I would never have thought that you would use to identify the customer pockets of people that are underserved and need help, and I think that’s really interesting.
If I think back to some of the companies who I have seen playing in this space for years, it has been kind of putting a product in front of a customer because you know that customer will be there. But then you have to deal with the education of those consumers. Why do they want to buy the product? And they have not all worked as well as everyone would have hoped they would.
Now, because of that data-driven approach that they’re taking, they’re getting very targeted, they’re understanding the problems that these consumers are dealing with, they’re understanding much more of the behavior of those customers and what they do on a week-to-week, month-to-month basis—deposit their payroll check or go cash their payroll check and shop then do their bill pay in a retail location. It is interesting how a number of different players are taking that data and really trying to build insight and hopefully great consumer experiences and products.
What are some perceptions about fraud or fraud prevention that you think need to change?
For us, because of what we do, fraud is an ongoing topic. What I am seeing is people looking at solutions around fraud and identity that they can couple with unique product capabilities and things they are bringing to the market. It is not an independent conversation. They are looking at how they [should] take these products to customers. How do they evolve the offering, particularly the digital fraud that comes with that? I was in a conversation earlier today with somebody talking about fraud, cyberidentity—this all comes together and clashes. Again, it comes back to data, it comes back to analytics , it comes back to working as an industry to try and solve the problem.
There is a big piece there around making sure that the right data is flowing between players in the ecosystem. We had this conversation with a bank [where] we were talking about fraud as a problem. As vendors we must build business cases and strategy papers to get investment in our platforms to help our customers fight fraud. The banks must go and pitch their strategy committee and boards to get investment to deploy those. Meanwhile, the fraudsters are off running around using the same technology we are all trying to get budgets to buy and to defraud us and all our customers. This problem is not going away. There is a heightened awareness of the risks that have come, particularly around digital… With digital comes fraud, comes risk from cybercrime as well. It goes hand in glove in terms of the way people are thinking about it.
Do you think KYC & fraud become easier to detect because there are more identifiers?
Right now, fraud is probably the best business case you can have an investment in. I say that in jest, but if you are a fraudster, the chance of you getting caught and prosecuted today globally is probably 2-5%. I have been on panels with law enforcement. Either the case doesn’t get to them or putting it together with the different parties that you need to go in and prove it to convict is very difficult. So, if you want to have a good chance of success, go try to commit fraud. It’s a real problem.
To the point around data and putting your data out there, is that a solution? Should consumers be more aware of contributing data to help people protect them? That is a difficult one, because you have to educate an average customer about how their information can help to protect them. I have seen examples where some banks have done that. They will only give you access to services on your mobile phone if you can consent to allow them to get access to data on that device to help protect you. It is a trade-off.
The other side of that, though, is the average consumer puts way too much information out there in the public domain that can help fraudsters go and put together their identity, create synthetic identities and other things, so people need to be a little more careful about what they are putting out there unconsciously because that really does cause big problems.
How can identity verification facilitate a better user experience or growth?
That is a great question. I think it is that trade-off between friction and fraud or protection and experience. We are having a lot of those conversations with customers that are designing new products and designing new solutions and talking about a dynamic approach to the consumer journey that brings in different types of friction through that process, depending on the level of risk that it looks to be displaying around that individual transaction. That could be when someone opens an account. If they are coming from a suspicious IP address or a device has been seen in fraudulent transactions before, perhaps you take them through a much more cumbersome, high friction journey. You might run different services in the background where you feel unsure about that individual… When you talk about payments and fraud, once money is gone, it is very hard to get back.
The cost of a particular transaction, if it goes wrong, can be thousands of dollars or more. So, there is an important trade-off between fraud and friction. It is a good conversation to have as well, because it makes people really think about how they design those products and experiences and brings a much broader set of stakeholders and functions together. This is important for fraud, AML, and identity access management and technology teams. That is really important and only going to continue as people digitize their products.
How can Refinitiv help these fintechs and banks enhance their offerings?
Being here at Money20/20, we are talking to a lot of customers and prospects about how we can help them. That idea of smart friction is something I really like. Where can we help to provide them with some of that? I was talking to a customer yesterday and they said, can you show me another customer that I can go to and see and use their product to experience what you do? I can give you a lot of customers, but you will not see us.
And that is the beauty about what we do. We want to be in the background. We want to provide confidence to our customers about who they are dealing with. The best thing we can do is not be seen in that experience. We take the consumer friction away but provide confidence to our customers about who they are dealing with. They are who they say they are, are coming in from where they say they are coming in from, and they are a genuine customer.
Fundamentally, whether you are talking about these exciting new digital products or talking about traditional banking and the way that people move money, it’s the same thing. It is a risk-based approach. What is the risk associated with that particular event or transaction, and what are the protections you need to put in place as an institution or organization to make sure that you are protected? If you are logging in for the first time, but you are not actually adding any payment information, [that’s] a small risk potentially. If someone is going in and linking a bank account and subsequently doing a transaction: high-risk.
It is incumbent on us to help our customers think through those different types of risk because in this space, fraud is moving so fast. We help educate customers about the kinds of risks they are facing because there are unintended consequences of trying to do a great thing for customers. It is an interesting place. We are certainly having conversations about where Refinitiv can play a role to help our customers and the topics here at Money20/20 just lend themselves to solutions like ours.