Over the last few years, there has been a massive increase in online shopping. Unfortunately, new eCommerce stores and unsuspecting customers quickly became the prime targets for cybercriminals.
Finances are often the most stress-inducing aspect of our lives. Even though we have been thought how to take care of them from our very first savings, the game changes completely once you step into the virtual financial world.
These days, criminals use a variety of techniques and scam schemes to swindle large amounts of funds from online bank accounts. With that said, it takes more than just creating a strong password to protect your e-wallet.
To find out what measures should be taken to fight online fraud, we reached out to Dieter Spangenberg, the Head of Fraud & Payments at Koin – a financial solutions company.
What is the story behind Koin? What has your journey been like?
Koin, Despegar’s fintech arm specializes in financial solutions for both companies and end customers, through payments, financing, and fraud prevention. Despegar has invested over the last 10 years in developing a revolutionary solution to fraud and payments to become the leader in Latam's travel industry. Now, all these innovative technologies, with a focus on maximizing approval and minimizing fraud losses, are available to the whole e-commerce industry in LATAM through Koin products.
Can you tell us more about what you do? What are the main challenges you help navigate?
Koin offers a distinctive fraud prevention solution focused on increasing conversion and sales protection, that combines a powerful rules engine and machine learning models. Together with the excellent performance of our team of expert fraud fighters we achieve results 10x below the industry average of Latam e-commerce.
In addition, Koin also has an innovative payment orchestrator which is connected to all the main Acquirers, gateways, and alternative payment methods, with a proprietary payments engine that allows merchants to maximize sales conversion.
At Koin, we use a comprehensive approach to identifying positive behavior to increase acceptance and reduce friction. We combined a group of attributes, behavior, and customer information (email address, document ID, device, and more) with the power of our network and a holistic approach that makes us address and accomplish the main goal of our clients. Our mission is to allow Business Owners to focus on their business strategy growth while we protect their sales.
What cybersecurity risks do you think new business owners often fail to take into account?
Business owners often fail to start an online business or new product without having a good fraud prevention strategy. This may result either in a poor sales conversion funnel, they may add too much friction during the user journey declining good customers, or receiving high amounts of chargeback because of not having the right fraud prevention validations.
Also, new owners think of their fraud prevention strategy as trying to catch the bad customers or fraudsters that threaten their healthy growth but they dismiss or ignore the impact of their fraud strategy as an ally of their sales funnel. A low dynamic frictionless tool for good, repetitive customers, many times is more important than a "fair" stopper. How you identify them, and what you do in every scenario determines how smoothly or friendly your fraud prevention shield would be towards your final goals, like more sales and more conversion.
How did the recent global events affect your field of work? Did you introduce any new features to Koin as a result?
There was an obvious shift from offline to online and also more and more new merchants and startups were being born 100% online. This new scenario along with the fact of massive personal and credit card information being compromised sets an environment of the perfect storm for fraudsters.
Hence, we are continuously working on innovative solutions to stay ahead of the fraudsters and the industry's needs. We recently launched a new version of our Device Intelligence solution that allows our clients to increase positive behavior identification and silent authentication together with our Account Protection solution. All these components are an important part of our integrated platform that helps companies and merchants to be protected on Onboarding, Logging in, and all Payments transactions.
What fraud methods do you think are the most prominent nowadays? Are there any signs that can help identify them before any damage is made?
During the peak of the pandemic, there was a steady growth of what we call “friendly fraud” mainly due to cancellations, refunds, and use of services policy where some good customers turned into almost undetectable fraudsters. Inexperienced buyers, unaware of the potential risks are an easy target for fraudsters. Account takeover is growing, payment fraud also but the key to success is once again identifying good customers, understanding behavior, dynamic friction, anomalies detection, and a strong network that would serve as a shield for everyone. A key combination between technology, data, and years of expertise is what Koin has to offer for every merchant in Latam.
Furthermore, Account TakeOver and Phishing are still the main cybersecurity risks we are dealing with. Fraudsters started to learn how common fraud prevention tools work, modifying the classic behavior of a fraud attempt. Examples of these are Silent fraud and Clean fraud. The first one uses a strategy of “aging the data”. Requires patience and a lag, maybe of months, between when the data is stolen and when it is used. The second one is the use of fraudulent information in an intelligent or sophisticated way. Example: trying to avoid velocities and morphings with fewer fraud transactions in particular targets.
Which characteristics make a business an attractive target for fraudsters?
New businesses or businesses that are experiencing a heavy increase in sales volume that sell products that are easily resold are the most attractive target for fraudsters. And also businesses with a lack of resources to have a fraud prevention strategy become an easy target too. When fraudsters find a whole within a business, they start to exploit this vulnerability and also share this information with other fraudsters, and then it will take longer and much more resources to take out those fraud attacks. That is why business owners should count from day one on a good fraud strategy to send fraudsters away to the following less protected businesses.
We also are working to break those principles by providing an affordable fraud prevention tool that is powered by a strong network that acts as a safety net between industries and markets showing fraudsters that there is no room to jump from merchant to merchant.
Besides easier payments, what other aspects of our daily lives do you hope to see improved by innovations in technology?
Online and information security have become essential in our daily lives. Almost everything we do is now online, so security has become necessary in all aspects.
We didn’t have that problem when we were shopping in stores, but now that online shopping has been increasing at a really fast pace, security has become more important than ever. Without a proactive security strategy, businesses and companies risk the spread and escalation of malware, attacks, and fraud.
In this age of ever-evolving technology, what do you think are the key security practices both businesses and individuals should adopt?
Fraud prevention software is the key to protecting companies and people. With robust fraud prevention software, businesses not only protect themselves from fraudsters but also protect their customers (and their data) from attacks.
However, fraudsters and hackers are always evolving, so it is necessary to have a unique, integrated, omnichannel, and based on rules and machine learning fraud prevention ecosystem.
And finally, what’s next for Koin?
Koin's mission is to power an economy in which everyone wins through the development of disruptive, innovative, and inclusive financial solutions. There is a huge opportunity for fintech companies like Koin in the region which through technology and being 100% focused on the clients want to solve some structural issues that legacy and traditional players are not addressing. Our goals for the next months are to be in more countries and to expand our customer base, which is key to the evolution of all our solutions.