Neo Banks – What is Different About Fully Digital Banks? 

Neo bank is a new and fancy term that broadly refers to those new banks which are primarily digital and offer little-to-no physical infrastructure or face-to-face interaction at any stage through their customer journey, instead offering all their services through digital mediums. 

However, the innovations of these new banks exposes them to new risks that may not be faced as much by more traditional banks. 

What are the Most Common Types of Fraud? 

• Identity Theft: the use of social engineering techniques – phishing, smishing and vishing – have become commonplace methods for stealing identities that can then be used to commit fraud through neo banks. 
• Account Opening Fraud: the lack of physical medium can make it easier for scammers to open fake accounts using fraudulent and/or stolen identities. 
• Money laundering: because neo banks process transactions quickly through payment gateways, the technology can make it easier for criminals to launder money than more traditional banking services. 
  
• Account Takeover Fraud: hackers can commit brute force attacks against entire neo banks or individual accounts, which are typically more exposed to such risks than traditional banks due to the digital nature of their services. 

How to Prevent Fraud in Digital Banking 

The best methods and systems for preventing fraud will vary between banks. This is especially the case in jurisdictions that employ a Risk-Based Approach (RBA) to fraud prevention, as this mandates that institutions tailor their fraud prevention strategies to best mitigate the risks that specifically face them. 

Nevertheless, there some are good practices that should be universally followed in order to most effectively mitigate the threat of financial crime. These include: 

• A Proactive Fraud Prevention Approach: designed from the ground up, a bank’s digital infrastructure should integrate robust fraud detection tools that employ modern techniques to verify identities during the customer onboarding process and excel in even the most stringent AML/CFT standards. 
• Staff Training: given the brutal effectiveness of social engineering techniques in recent years, staff should be highly trained in how to recognize social engineering techniques and handle sensitive information in a highly professional and secure manner. 
• Customer Awareness: staff training is important, but so too is the vigilance of a bank’s customers. Taking steps to best educate your customers and equip them with the skills to avoid falling victim to fraud will save a bank time and money in the future. 

KYC, Identity Verification and Ongoing Monitoring for South Africa 

By providing world-class KYC solutions, ThisIsMe gives South Africa’s financial services industry the tools it needs to quickly and easily verify their clients and provide an excellent customer experience in the process. 

As South Africa’s leading provider of KYC, due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience how we can help your business ensure regulatory compliance, mitigate risk and secure its transactions, contact our team here.