FinTech’s Battles Against Identity Theft

Identity theft and identification techniques underpin the whole enterprise that is FinTech. Our friends at UKTechNews report the latest in the major types of identity theft and fraud, their impact across industry. Later on in the article, biometric identity screening is discussed as a useful technique to mitigate identity fraud.

The Most Common Categories of Identity Theft

  1. Impersonation: A Genuine Identity Document is Stolen or Falsified
  • Stolen document of someone who looks similar
  • Replacing a photo on a genuine passport
  • Modifying legitimate data, for instance date of birth, name or expiry date, to match other records owned by the forger
  1. Counterfeit or Fake Identity
  • An unauthorized reproduction of a genuine document: these documents are neither issued nor recognized by an official authority
  1. Synthetic Identity
  • Combining genuine (stolen) and fake data to produce a new identity

Biometric Identity Screening

  1. When a user registers, first validate e-mail ownership and require 2-Factor Authentication (2-FA).Nowadays SMS is commonly used as the second form of authentication but these are subject to SIM-Swap Fraud and Phishing.  A mobile number can be taken over and used to gain access to that person’s account, often without them even being aware.  A far better alternative is Key-Based 2-FA, where the PIN is neither transmitted nor stored. It would fail after a few incorrect attempts and even a keylogger could not access the keyboard.
  2. Require Proof of Address, such as a recent utility bill.
  3. Ensure the real applicant is presenting the identity document
  4. Validate the data held in the official document (passport or driving licence): name, date of birth, expiry, checksums and data held within bar codes) matches data held by independent sources and apply tampering checks
  5. Enrol and bind the user with Key-Based 2-FA login

No system is foolproof but we should aim to reduce most types of identity fraud. A Biometric Identity Screening solution should capture several real-time snapshots of the user and compare video to the photo in the Identity Document. To prevent a fraudster from downloading photos from social media to hold in front of a webcam, there must be a “Liveness” check, where users complete a series of actions, such as looking left or right, to differentiate a real person from a photograph.

Historical Performance And IFISA Process Guide

  • Money&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee). 

That figure is the result of over £21 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.

  • Money&Co. has been lending for over 5 years and has only had two bad debts so far, representing a bad debt rate of 0.03 per cent per annum.

All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.

So here’s our guide to the process:

  • Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
  • Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
  • Step 3: Buy loans in the loan market. Once you’ve put cash in your account it will sit there – and it won’t earn interest until you’ve bought a piece of a loan. It’s this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans – all loans on the Money&Co. site can be held in an IFISA – and your money will start earning tax-free interest.

The ISA allowance for 2019/20 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.

Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.

Risk: Security, Access, Yield

Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.

Tags: fraud, identity, UKTN


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Disclaimer: Money&Co.™ is the trading name of Denmark Square Limited, Company Number 08561817, registered in England & Wales, authorised and regulated by the Financial Conduct Authority (FCA). The company is identified on the Financial Services Register under Reference Number 727325. The registered office is 58 Glentham Road, Barnes, London, SW13 9JJ where the register of Directors may be inspected. Denmark Square Limited (ISA manager reference number Z1932) manages the Money&Co. Innovative Finance ISA.