The fintech sector has grown in recent years, attracting significant investments thanks to their ability to innovate in the financial field. However, in 2023, French fintechs raised around 919 million euros, a decrease of 70% compared to 2022.
Faced with this downturn, fintech leaders need to revise their approaches. Innovation remains essential, but it must be combined with tighter financial management and a quest for greater profitability. Fundraising is no longer enough. Fintechs also need to reduce expenses and prevent losses to remain competitive.
Security breaches cause Fintechs to lose money
Fintechs have critical security responsibilities, including protecting user data and assets, as well as maintaining their own capital and reputation. Neglecting these aspects can lead to financial losses, disputes, and an erosion of customer trust.
It is therefore vital to implement strong security measures, such as data encryption, rigorous identity and access management, and constant monitoring to detect any anomalous activity.
In particular, they need to pay attention to identity fraud, which causes huge financial losses.. In France, more than 200,000 people are victims of online identity theft every year. It reaches several hundred million euros in losses per year. The Banque de France reported that 70% of the fraud amount targeted transfers initiated from online banking interfaces.
These elements suggest that online banking fraud can generate significant costs for fintechs offering fund management, in particular with regard to refunds to customers who are victims of fraud and prevention and security measures. Investing in advanced fraud prevention technologies is critical.
How can strong authentication help you reduce losses?
Multi-factor authentication (MFA) is an advanced security method that requires multiple forms of proof of identity from the user, making it more secure than simple or two-factor authentication methods.
The European Payment Services Directive (PSD2), introduced in 2018, made strong authentication mandatory for banks and payment service providers.
[The DSP3, scheduled for around 2026, will cover a wider field of application than PSD2, it will bring changes concerning strong authentication, data sharing, fraud prevention, and accessibility.]
These measures aim to strengthen protection against fraud and unauthorised access that cause heavy losses to customers and businesses.
How does multi-factor authentication (MFA) work?
The addition of biometrics to multi-factor authentication enhances security by using unique physical characteristics. This process can take place in three steps:
Step 1 : the user enters their email address and password on the account they want to connect to (something they know).
Step 2 : he confirms his identity thanks to his identity document that he must photograph or film (something he owns).
Step 3 : finally, it performs facial recognition via a mobile application (which it is).
This method ensures that access is strictly restricted to the authorized user, guaranteeing optimal protection.
Biometric methods, while adding a significant layer of security, can also be vulnerable to various forms of circumvention or falsification.
- There is always a risk of theft or false documents: If the identity document is stolen, unauthorized access may be obtained. Recognizing false papers, using encryption, and being able to remotely revoke access are key to limiting damage.
- Recognition can be bypassed: fake photos and videos can be used to trick facial recognition systems. So, advanced facial recognition technologies must now include motion detection, depth recognition, or expression analysis to distinguish real faces from images or masks.
Why is strong authentication linked to official identity an essential way to boost the revenues and reputation of a fintech?
Strong authentication reduces the risk of fraud and thus minimizes financial losses and costs associated with data breaches. It ensures regulatory compliance, helps avoid sanctions and the company's reputation in terms of security. It also stimulates innovation and attracts customers who value safety and innovation.
How can you ensure that multi-factor authentication does not degrade the user experience and customer loss?
Recurring problems with multi-factor authentication
Problems that impact the user:
- User frustration when asked to redo a video of their ID and face several times because the software will not be able to identify them.
- When their identity document is not supported by the software.
Issues that impact businesses:
- Each acquisition that fails generates an additional cost for the customer who pays a price per check. So if the user checks 3 times before succeeding, the business will pay 3 times its estimated cost.
- Unsubscribing or abandoning the course by frustrated users.
Several elements must be taken into account when choosing your authentication solution:
- Reducing Frustration : simplify the login process to avoid user irritation in the face of multiple steps.
- Clear instructions : provide simple, jargon-free guidelines to facilitate authentication.
- Explicit error messages : prefer understandable error messages to generic codes, indicating the cause and the solution.
- User education : offer educational resources on strong authentication to encourage adoption and understanding.
Financial risks in the event of non-compliance with cybersecurity regulatory texts
Fintechs need to be attentive to local and international regulations to maintain compliance. Failure to comply with them can lead to severe financial penalties, damaging profitability and reputation.
In particular, they risk:
- fines that can amount to several million euros
- Revocation of licenses
- temporary activity bans for managers
- penalties that can represent a significant percentage of turnover
- corrective actions may be required to strengthen cybersecurity and operational resilience
Our solution goes further than covering the minimum authentication needs for fintechs. Accompanied by the best experts in document fraud from the Gendarmerie Nationale, ShareID provides a strong and compliant authentication solution that allows secure identity verification.
Our particularity is our method of managing and securing the personal and biometric data of our users. In fact, we never store data and thus avoid any risk of theft or possible alteration of your personal data.
Contact us today to find out more about our strong authentication solutions.
