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Prevent Account Creation Fraud in FinTech: It All Starts with an Email

December 7, 2021
By Diarmuid Thoma

Prevent Account Creation Fraud FinTech blog

It’s no secret that creating an account for virtually anything now requires an email address, especially in FinTech.

But just because someone enters an email into a registration form doesn’t always mean that the email address is real or belongs to them. In today’s blog, we’re tackling fraudulent account origination: what it is, how it impacts FinTech organizations, and how you can better protect customers with email-centric data. 

What is fraudulent account origination?

You probably know what fraudulent account origination is, but to make sure we're all on the same page, fraudulent account origination occurs when an individual uses a new, fake, temporary, compromised or even disguised email to open an account. This happens in countless transactions, including:

  • Opening a bank account
  • Applying for a credit card
  • Applying for a store or organization-based credit card
  • Opening a payment app account

As a member of the FinTech world, you're also keenly aware of how critical fraud prevention is at account origination because as time passes, if fraudulent account creation isn’t detected and rectified, it majorly impacts your institution's ability to operate efficiently.

How does this impact FinTech organizations?

The most direct impact of fraudulent account origination for FinTech organizations is fraudulent data entering their databases. Fraudulent data entry also indirectly causes 2 major issues:

  1. The inflated volume of fake and or fraudulent accounts lowers the quality of the companies' client base causing increased default rate, decreasing profit margin and public trust.
  2. Acquisition Metrics will also be incorrect due to the inflated number of fake accounts. This will in turn interfere with the companies' Monthly Active
    Users (MAUs) as fake accounts will either strike just on creation or remain dormant until the fraudster ages them.

How can FinTech companies protect customers?

The first step to protecting customers is identifying fraudulent data, but this is sometimes more difficult than it seems. FinTech organizations' first line of defense to identify fraud is typically traditional financial data, but consider this: ​​more than 50% of digital account applicants are 35 or younger, meaning they generally have little to no credit history.

Therefore, FinTech companies can’t rely on traditional financial data indicators to determine an applicant’s risk. Even tools like IP address and email address validation may be part of your current toolkit, but they're simply not enough.

By only assessing risk using email validation, IP address or limited financial data, FinTech organizations increase their risk of enabling fraudulent account creation and the potential to lose customer trust.

Use email-centric tools to prevent fraud

While Email Validation is key for assessing risk, it works best in tandem with a comprehensive email-centric fraud prevention solution. 

A great, comprehensive email-centric fraud prevention solution will include additional data around an email address to assess risk, such as:

  • Relevant activity across networks
  • The number of sources from which an email was seen
  • The age of an email address
  • Whether or not the email has multiple variations
  • The validity of the email’s domain
  • Information on the registered Domain like creation data and activity

When FinTech organizations add these key email data fields to their existing fraud prevention algorithms, the ability to accurately identify risk and prevent fraudulent account creation increases exponentially.

The leading global FinTech organizations power their algorithms with TowerData’s Fraud Prevention solution. Why?

We've been compiling email-centric identity data for over 20 years, making us uniquely qualified to enhance fraud discovery models; furthermore, we have a high recognition rate of global email data, including 98% of North American email data, and receive billions of real-time signals every month from around the world. 

Learn how TowerData’s Fraud Prevention solution can help prevent costly fraud with fast, easy and secure access to the comprehensive data you need. Reach out to our team to schedule a call today!

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