FinTechs, Experts, and Regulators Meet at FinTech Fraud Summit

As the FinTech industry has grown over the past few years they’ve also tried to prove their legitimacy and separate themselves from less reputable financial services. Some of their efforts in achieving this goal include forming the Marketplace Lending Association, drafting a Small Business Borrowers’ Bill of Rights, and making strides with regulators overall, which could soon lead to firms being considered “special purpose national banks.” Still, it’s not just the FinTechs themselves that need to keep their nose clean when it comes to fraud — they must also pay attention to those using their platforms.

On March 17th, 2017 the San Francisco Chapter of the Association of Certified Fraud Examiners in partnership with Ernest & Young presented the first ever FinTech Fraud Summit in San Fransisco, California. There regulators, fraud experts, and those representing companies like Lending Club, Prosper, and OnDeck gathered to discuss what types of fraud threatened the sector and what could be done to curb it. 

One of the presentations was lead by Timothy Li, who spoke to a number of potential scams and other fraudulent activities that FinTech could fall prey to. For example, he pointed to crowdfunding platforms like Kickstarter or FundAnything that could potentially be used for such devious purposes as money laundering. Even if that seems somewhat far-fetched, he also suggested that some campaign sponsors may be trying to raise funds for pieces of intellectual property they don’t actually own or running other such scams. However, a theme to Li’s keynote was that it’s not that fraud is unique to the FinTech industry, but that these platforms give fraudsters new opportunities and outlets for their schemes. 

In another keynote, Prosper president Ron Suber talked directly to some of the fraud facing the peer to peer lending space. Two schemes in particular that he called out were “shotgunning” and “loan stacking,” which both involve customers taking out multiple unsecured loans in a short period of time. But, like Li, Suber made a point to note that the problems facing P2P also affect other unsecured loans providers including credit card companies.

So what’s is the FinTech industry at large to do about the many faces of fraud they may encounter? Innovate, of course. Today many FinTech companies are working to better their fraud protection by not only employing software and algorithms that can detect suspicious activity earlier and more effectively but also working with third party companies that may offer their own set of solutions. 

As both Li and Suber spoke to, fraud is far from being a FinTech exclusive problem. However, for an industry working hard to appease regulators and earn the trust of consumers, being proactive in shutting down scams and other dubious activity has become a top priority. Luckily, while criminals can be crafty, they’re likely no match for the minds that lead both FinTech firms and fraud examiners. With the two now poised to work together more closely, expect more big ideas and solutions to come down the pipeline.


Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded in 2015 to focus on personal finance and the emerging FinTech markets.

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