Author: vinaykjay

The evolution of technology-driven fraud solutions, such as predictive analytics, may enable companies to rethink their position on the unavoidability of fraud losses. Advancements in technology continue to drive fraud detection costs down, while simultaneously increasing efficiency. Businesses can now generate strong ROI on fraud detection.

The latest evolution of anti-fraud solutions empowers the fraud investigator to drive operational efficiency and lower labor costs in the continuous fight to tackle fraud. These solutions enable the fraud investigator to do the following:

1. Better detect incidents of potential fraud by using more accurate rules to improve fraud detection precision and reduce the likelihood of false positives. This eliminates wasteful time investigating non-fraudulent incidents
2. Prioritize the focus of investigations by using a risk-based approach so fraud investigators can first review potentially fraudulent transactions that have the highest risk or nominal value. This optimizes the allocation and usage of resources
3. Improve decision making and assessment of fraud through an easy to view and centralized environment, as well as reducing manual tasks to gather, analyze and review information. This increases the efficiency and effectiveness of the investigators

Organizations can generate a much higher return on investment by implementing an anti-fraud solution that not only reduces time and costs, but makes better use of limited resources. Investing in a solution that helps to secure and protect an organization’s assets in a way that demonstrates clear ROI will be welcomed by executives and financial officers.

Compliance officers can also help their business make smarter decisions by providing accurate information and actionable insights to combat fraud and protect their valuable assets. This cost effective fraud solution not only helps companies reduce their fraud loss and its associated risks, but also make informative business decisions and grow their bottom line.

Source: https://www.forbes.com/sites/riskmap/2016/11/16/combatting-fraud/#2d84ec7223d8

In today’s business world, data is a valuable corporate asset which, when managed properly, can support a company’s ability to achieve strategic goals and financial results. Executives can improve their ability to quickly access accurate data by adopting MDM best practices. MDM typically involves a series of consistent processes and policies with proper governance and oversight. Master Data Management is focused around several key and actionable business segments including, but not limited to, the material, customer, supplier, and employee master.

Strong Master Data Management governance can drive greater consistency and accuracy of data, which can be an asset in driving world class operations, providing the ability to use data as a competitive advantage, and reducing unnecessary waste. In contrast, without proper governance, there is limited accountability and ownership of data, which creates compliance risk as well higher expenses and lost revenue.

A lack of sound master data processes and procedures can cause major issues that diminish the value of data and systems. Addressing these issues by implementing MDM ownership and governance can help resolve many of these concerns. Therefore, effective management of master data is crucial as they are the means of attaining other strategic and operational objectives.

Source: http://spendmatters.com/2013/05/09/the-importance-of-master-data/

When an industry transitions from using one or more “smart” and centralized networks to using a common, decentralized, open, and dumb network, it provides a significant benefits to the industry.

First of all, the internal costs shrink considerably. The costs of contracting are reduced via software contracts which take care of policing, timely payments, transaction execution, bargain, etc. On this foundation a tsunami of innovation that was pent up for decades is suddenly released. All the applications that could never get permission in the closed network can now be developed and deployed without permission. At first, this change involves reinventing the previously centralized services with new and open decentralized alternatives, which involves the removal of entire layers of intermediaries which are no longer necessary.

The Internet effected such disintermediation by replacing brokers, classified ads publishers, real estate agents, car salespeople, and many others with search engines and online direct markets. In the financial industry, the Blockchain creates a similar wave of disintermediation by making clearinghouses, exchanges, and wire transfer services obsolete.

Therefore, this will enable Peer-to-Peer exchange of values where significant values can be held by people involved in value creation, then those involved in capturing of values. As internet reduces the cost of search and co-ordination, Blockchain cuts the cost of bargaining, contracting, policing, and enforcing the contracts. Thereby, decentralization will also create a truly sharing economy.

Source: https://www.linkedin.com/pulse/blockchain-real-sharing-economy-uberisation-dr-mihaela-ulieru

The audit is simply a process by which auditors check the company’s math and application of accounting rules. Most of the investors take audited financial statements as major consideration to invest in a company. But by doing so it leads them to false sense of security when examining the audited frauds. Following are some of the common issues to say why a audited financial statement could not be true.

1. Auditors only examine small samples of transaction
   The heart of an audit is testing transactions. The auditors select a sample and test those transactions to ensure that they were properly recorded in the accounting system. The inherent limitation in sampling is that all transactions are not tested. And of course, it would not be possible for the auditors to examine all transactions a company enters into in a year.

There is always a good chance that a key transaction will not be part of the auditors’ sample, and therefore will not be examined. So many transactions are untested by the auditors, and that means there is a very good chance that a fraudulent item will not be part of the testing.

2. Auditors may be inexperienced
The current business model for audit firms (and the one that has been in place for decades) relies on relatively inexperienced auditors to do the bulk of the field work. While this may make economic sense in terms of controlling the costs of audits, it is a terrible practice from a quality control standpoint.

Most of the inexperienced auditors tend to not ask difficult questions because of their lack of experience. Those who have the knowledge to identify problems and ask difficult questions spend very little time in the field. They are best equipped to zero in on fraud, yet they provide little hands-on supervision of the inexperienced auditors.

3. Audit process are lagging with the dynamic nature of business
Given the dynamic nature of a business through mergers and acquisitions, development of new products and services, and constant strategic planning all mean that business is changing faster than ever. Comparing the financials of a company from year to year becomes nearly impossible because of all the changes. Therefore audit process has to catch up with the dynamic nature of frauds risks.

We can point out many of such similar issues surrounding why a audited financial should not be a major consideration in investing on a company, but what we need to understand is that traditional financial statement audits were never designed to detect fraud. However, sometimes fraud is detected by auditors, and they can increase their chances of finding fraud if they are so inclined and diligent.

Source: http://www.sequenceinc.com/fraudfiles/2013/06/escaping-detection-why-auditors-do-not-find-fraud/

Facebook with more than 1.55 billion active users each month, has entered into the payment sector recently. Hence proving it can be more than just a social media, and a platform for commerce as well. With such a large growing community, Facebook is taking this slow as a one-time chance to get it right.

Best payment experience than a rushed job: There are several strong competitors in the payments sector like Apple Pay, Android Pay, Samsung Pay, Paypal, Venmo etc… Now the point comes which of theses gives the best payment experience. Of course right now these apps may have the best experience, but Facebook gets its users slowly by releasing updates gradually to make sure it will give a best payment experience. Then the very fact that Facebook is getting the large population of eyeballs will set a huge service differentiator from the rest of them. Therefore, Facebook is taking its time to give its users a best payment experience rather then just getting the job done.

Potential for growth in markets of third world nations: Considering growing mobile market in third world nations like India, and Facebook’s efforts to connect the rural parts of the nation with its ambitious plans of giving free internet, its potential keeps growing with added user base. As people get more aware of taking advantages of these freely accessible technologies in the palm of their hands, Facebook will reach immense scales in the payment industry too. So basically Facebook may some day be a social currency with more than billions of customers.

Considering the advantages, it has over its rivals like billions of users in social media platform, and how it has acquired the giants in communication sectors like WhatsApp and Instagram, rolling out the payments in its Messenger app seamlessly will have a huge potential for the company’s strategy heading forward in the growing FinTech industry.

Source: https://blog.faisalkhan.com/how-facebook-s-messenger-payments-will-win-big-2c0259764097#.lel2pv29h

Advent of Blockchain has opened up a plethora of value adding options that is transforming the FinTech from ground up. One of such service category is remittance industry. Bitcoin micropayment startup SatoshiPay is developing a new proof-of-concept with Visa Europe’s innovation unit.

Work on the project was first disclosed earlier this year, when Visa Europe Collab said that it was exploring bitcoin micropayments for connected devices. At the time, the company indicated it was looking at use cases like smart light bulbs that could pay for their own electricity. The concept, according to SatoshiPay founder Meinhard Benn, involves the integration of the startup’s technology with Visa’s card payments structure, allowing for automated micropayments from a person’s Visa account to a SatoshiPay wallet.

This project is aimed at remittance industry where making micropayment is currently infeasible and this is just one use case of of how Blockchain can add value to the FinTech creatively. Blockchain has huge potential that is yet to be tapped with novel ideas that could completely alter the way we do the transactions. Notable from the smart light bulb use case is how blockchain is used innovatively to address mundane transactions by automating it completely.

References:

1. http://www.coindesk.com/visa-europe-bitcoin-micropayments/

2. https://www.wired.com/insights/2015/01/block-chain-2-0/

Google Hands Free is a payment technology that authorizes the transaction or enables your shopping payment method just by saying “I’ll pay with Google” to cashier. The app allowed user to enter their payment and photo information, and then uses the combination of Wi-Fi, Bluetooth and location services to verify if your phone was in the store. When paying cashier would be presented with a photo that the user has set up in an app to confirm the transaction.

Despite Google’s best intention to provide seamless shopping, it never scaled up beyond the South Bay area.   But the cool thing to note here with this kind of payment technology is that, how these technologies are trying to remove some pain points around the shopping by streamlining the purchasing process. But while Google plans for truly seamless shopping experience seem to be on hold for now, others in the tech industry are getting started with Amazon’s cashier-less Amazon Go grocery store- which functions similar to hands-free principles like Google’s app.

Although Hands Free app is shutting down, it could be the genesis of novel payment technologies like Facial recognition-based shopping that’s done completely by computer-controlled systems. With all these interesting payment tech coming to market, we have to stay tuned to witness the revolution in the payment industry.

Source: http://www.theverge.com/2017/2/2/14483758/google-hands-free-payment-app-shut-down-android-pay

ICICI, India’s largest private bank, and Emirates NBD,  recently announced successful international transactions for both trade finance and remittance purposes using blockchain technology.

This pilot transaction  was executed to showcase confirmation of import of  “shredded steel melting scrap” by a Mumbai-based export/import firm from a Dubai-based supplier, and to exchange and authenticate original international trade documents. The blockchain trade application co-created by ICICI Bank “replicates the paper-intensive international trade finance process as an electronic decentralised ledger”.

The information contained in the blockchain transaction included a purchase order, an invoice, shipping and insurance papers. Each participant was able to access and view a single dataset, to authenticate ownership of goods digitally, transmit their trade documents, check the status of their applications, and transfer their titles, while maintaining confidentiality. Further, it allowed each participant to check online the status of the application, transfer of title and transmission of original trade documents through a secure network, while preserving client and commercial confidentiality.  The application is designed to work with existing banking systems and processes, allowing banks to “plug in their systems and process.

Source: https://www.finextra.com/blogposting/13593/blockchain-accelerated-activity-in-trade-finance

The U.S. insurance industry represents the largest in the world, with an annual revenue (think insurance premiums) of more than $1.2 trillion. However, there have been few major technological innovations in this massive industry, making it the perfect target for financial technology startups.

Therefore, the World Economic Forum predicts that the most significant fintech disruption will take place in the insurance sector. While 90% of insurers fear this technological revolution, many insurance companies are beginning to see fintech not as a threat but as an opportunity. Quite a few traditional insurance providers are embracing fintech and incorporating innovative new technologies into their offerings.

Source: http://www.investopedia.com/articles/insurance/121416/could-fintechs-insurance-innovations-disrupt-industry.asp

Bitcoin’s blockchain is often touted as a revolutionary step forward for network security. But August 2016 theft of nearly $68 million of customers’ bitcoins from a Hong-Kong-based exchange demonstrated that the currency is still a big risk.

But massive bitcoin US:BTCUSD  security breaches like the one at Bitfinex and the attack that bankrupted Mt. Gox in February 2014 highlight the need for the cryptocurrency community to find a compromise that would allow the so-called blockchain to be more flexible so victims of theft can recover digital currency that has been spirited away by hackers.

The blockchain is the universal record of all bitcoin transactions. Each computer running the bitcoin software keeps a copy of the ledger encoded in its system. And every time a group of transactions are processed by bitcoin’s global network, they must be checked against each computer’s stored copy of the blockchain.

This digital ledger is both one of the biggest assets of bitcoin-like currencies and one their biggest liabilities. Because once a piece of information has been added to the blockchain, it can’t be altered, and that makes it difficult to remedy thefts.

The security flaws that make these hacks possible aren’t inherent; instead, hackers exploit specific security flaws at cryptocurrency exchanges. Although Bitfinix has not released any details on how it was hacked, this hack shows how hackers exploit Bitcoins underlying infrastructure to hack it.

Source: http://www.marketwatch.com/story/bitfinex-hack-shows-how-bitcoins-blockchain-can-be-a-liability-2016-08-03