Protecting Your Funds From Online Scamsters: Strategies For Avoiding Fintech Scam Schemes

Given the complexity and growing sophistication of fintech scams, users must implement effective strategies to safeguard their funds.

Scammers coerce individuals into verifying fraudulent accounts or transactions, either through intimidation, manipulation, or deception, putting victims in a vulnerable position.

Source : Mohamed Hassan/Pixabay

By Amjad Raza Khan

The term "FinTech" emerged in the 1990s when Citicorp, now known as Citigroup, initiated the Financial Services Technology Consortium, aiming to bridge the gap between banking institutions and tech companies to explore the potential of emerging technologies in finance. However, it wasn’t until the early 2000s that fintech began to truly revolutionise the financial landscape, largely due to the rapid expansion of the internet and digital technology. This period saw a major transformation in how people accessed, managed, and used financial services, with innovations like digital wallets, peer-to-peer lending, and online payment gateways becoming widely adopted.

While these innovations brought convenience and efficiency, they also opened the door to a new breed of cybercriminals and fraudsters. With the expansion of fintech services, especially in customer-facing platforms, scam tactics have evolved in parallel. The fusion of finance and technology has not only empowered consumers but also created vulnerabilities. Scammers have capitalised on these vulnerabilities, targeting unsuspecting users through a variety of sophisticated methods. From phishing schemes to identity theft, fintech scams have become a major threat, highlighting the need for awareness and protection strategies in today’s digital financial ecosystem.

Common Fintech Scam Tactics

In the rapidly expanding world of fintech, the variety of scam tactics has grown significantly, putting millions of users at risk. Sumsub’s Identity Fraud Report reveals that identity fraud cases in the fintech sector surged by 73% between 2021 and 2023, rising from 0.67% to 1.16%. The report identifies five primary types of identity fraud that currently dominate the fintech sector:

• AI-powered fraud: The use of artificial intelligence has drastically increased, leading to a surge in deepfake technology. In 2023, there was a 10x increase in the detection of deepfakes, with crypto and fintech accounting for 96% of these cases. Scammers use AI to create highly convincing deepfakes to impersonate individuals and deceive financial institutions or users.
• Money-muling networks: Fraudsters trick or manipulate individuals into transferring illegally obtained funds through their accounts, making it harder to trace the origin of the money. These "money mules" are often unaware of their role in the scam.
• Fake IDs: Scammers use counterfeit identification documents to create fraudulent accounts or conduct unauthorized transactions, making it easier for them to bypass security protocols in financial platforms.
• Account takeovers (ATOs): Cybercriminals gain unauthorized access to user accounts, often through hacking or phishing schemes, and proceed to steal funds or personal data.
• Forced verification: Scammers coerce individuals into verifying fraudulent accounts or transactions, either through intimidation, manipulation, or deception, putting victims in a vulnerable position.

Practical, Actionable Tips for Protection

Given the complexity and growing sophistication of fintech scams, users must implement effective strategies to safeguard their funds. Below are some practical tips to help you stay protected in this fast-paced digital landscape:

• Enable Two-Factor Authentication (2FA): This extra security measure asks users to authenticate their identity using a second method, such as a code sent via text or an authentication app, making it much more challenging for scammers to compromise your accounts, even if they have your password.
• Use Strong, Unique Passwords: Avoid repeating passwords across multiple sites. Strengthen your credentials by blending uppercase and lowercase letters, digits, and symbols. To keep things secure and manageable, think about using a password manager to generate and store strong, unique passwords.
• Beware of Phishing Attacks: Scammers often use emails or messages designed to look like they’re from legitimate fintech platforms. Always verify the sender’s identity before clicking on links or sharing personal information. If something seems suspicious, contact the company directly.
• Monitor Account Activity Regularly: Check your financial statements and account activity frequently to spot any unauthorized transactions. Early detection can help you take immediate action, such as freezing your account or notifying your financial institution.
• Educate Yourself on the Latest Scams: Keep yourself informed about new fintech fraud tactics by following trustworthy news outlets, reading security-focused blogs, or signing up for alerts from your financial service provider. Staying knowledgeable is one of the best defences against scams.

(The author is the Co-founder & CEO, Cashaa)

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