Lucius DiPhillips

Socure made a huge impact for a top retail bank's customer onboarding process. By improving automatic identity verification rates and reducing fraud, Socure helped the bank approve thousands of new applicants and cut down operational expenses. Read more in our latest Impact Story!

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Why Real-Time Monitoring is the Future of Payment Fraud Detection Despite PSD2, 3DS, and other security protocols, overall fraud volumes are still increasing every single year. As I discuss Fraud Prevention with other colleagues in this industry, the topic they seem most excited about is the ability to do Real-Time monitoring. They believe it is not just an advantage but a necessity in fighting payment fraud. Let me explain... Real-time monitoring in payment systems involves the continuous analysis of transactions as they occur, allowing for immediate detection of suspicious activities. But why is this approach so crucial for the future of fraud detection? 1. Speed of Modern Transactions In a world where payments are processed in milliseconds, traditional batch processing and delayed fraud checks are no longer sufficient. Real-time monitoring allows for instant analysis, matching the speed of transactions themselves. 2. Evolving Fraud Techniques Fraudsters are becoming increasingly sophisticated, using AI and machine learning to create complex, hard-to-detect schemes. Real-time systems can adapt quickly to new patterns, providing a more robust defense against emerging threats. 3. Minimizing Financial Losses By detecting fraud as it happens, real-time monitoring can prevent or minimize financial losses. This is crucial not only for individual transactions but for maintaining the overall integrity of the payment ecosystem. 4. Enhancing User Experience False positives in fraud detection can be frustrating for legitimate users. Real-time systems can make more accurate decisions, reducing the likelihood of unnecessarily declined transactions and improving customer satisfaction. 5. Regulatory Compliance As financial regulations become more stringent, real-time monitoring helps organizations stay compliant by providing immediate visibility into transaction flows and potential issues. 6. Big Data and AI Integration Real-time monitoring systems can leverage big data analytics and AI to process vast amounts of information, identifying subtle patterns that human analysts might miss. 7. Cross-Channel Fraud Detection With the proliferation of payment channels (mobile, web, in-store), real-time monitoring can provide a holistic view of user behavior across platforms, making it easier to spot anomalies. I believe the future of payment fraud detection will depend on real-time systems that can analyze, learn, and adapt instantly. However, real-time monitoring is very challenging, as it requires significantly more computing power and sophisticated algorithms while balancing security and privacy. Are you already using real-time monitoring in your fraud prevention? P.S. Check out my newsletter https://buff.ly/3RXzt7Z

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Still getting through FinCEN's proposed rule to Strengthen & Modernize Financial Institutions' AML/CFT Programs (it is 178 pages). Of note, the requirement for institutions to ensure that their program is not only risk-based and reasonably designed, but also effective and in-line with national AML/CFT priorities will be new for some. The word "effective*" is used 181 times in the document. And for innovative software providers like us and those looking to adopt/pilot new approaches, "innovation" is used 34 times (and is strongly supported throughout!). Also, performing risk assessments becomes a strict regulatory requirement (though you should already be doing it); with the requirement as part of your risk assessments to consider FinCEN's national priorities and to apply resources accordingly. And in their own words: "FinCEN, in consultation with the appropriate Federal functional regulators, intends for these updates to: (1) reinforce the risk-based approach for AML/CFT programs; (2) make AML/CFT programs more dynamic and responsive to evolving ML/TF risks; (3) ultimately render AML/CFT programs more effective in achieving the purposes of the BSA; and (4) reinforce the focus of AML/CFT programs toward a more risk-based, innovative, and outcomes-oriented approach to combating illicit finance activity risks and safeguarding national security, as opposed to public perceptions that such programs are focused on mere technical compliance with the requirements of the BSA." https://lnkd.in/eab-3PqY

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JPMorgan Chase, Bank of America, and Wells Fargo are under federal investigation by the Consumer Financial Protection Bureau (CFPB) for how they handle scams and fraud on the instant payments platform Zelle. The investigation examines the banks' efforts to stop scams and reimburse victims. A Senate subcommittee found that reimbursements for reported scams dropped significantly, with $880 million in disputes unresolved between 2021 and 2023. Despite this, Zelle claims most transactions are fraud-free and stresses focusing on the criminals. JPMorgan warns of potential legal challenges against the CFPB's approach. It may be a good exercise for all organizations to review their fraud and security controls. How do you protect consumers and businesses from these attacks? Current controls like OTP are clearly not working. As pressure mounts, it will become critical to ensure that scammers and fraudulent accounts are identified and moved off the books. Have you reviewed your portfolio for high-risk accounts? This may be a prudent exercise to undertake BEFORE you close out 2024. https://lnkd.in/dnANcAc7

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In 2022, Wells Fargo launched a credit card with fintech startup Bilt, backed by giants like Blackstone and Mastercard. The co-branded card offers a unique perk: users can pay rent without landlord fees while earning rewards points. Over one million accounts were activated in the first 18 months, attracting many young adults. Wells Fargo, however, is losing $10 million monthly as savvy customers flock to the card. These financial losses have prompted ongoing renegotiations. Wells Fargo has informed Bilt that it won’t renew their contract, ending in 2029, unless terms are improved. Despite these challenges, the credit card program propelled Bilt’s valuation to $3.1 billion in January, up from $1.5 billion in late 2022. The renegotiations are crucial to sustaining Bilt's ballooning valuation. #fintech #unicorn #venture https://lnkd.in/g25GJ8wf

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Thrilled to announce our launch of our Third Annual "The State of Fraud and AML Report" 🎉 We surveyed 369 professionals in the world of fraud and AML teams across fintechs, banks, and credit unions. One of the trends I found interesting in the report is the rise of the scamdemic. What I found most fascinating is that while scams are not subject to the same degree of consumer protection that ACH, card, and check transactions have, many financial institutions reimburse victims of scams. The pressure to maintain customer satisfaction and the reputation risk is just not worth it for most institutions. But it's not uniform across the board. Fintech companies reimburse customers far less than banks and credit unions. And smaller banks and credit unions disproportionately reimburse customers 💰 In the world of increasing competition in financial services, being customer-first is needed to win. And if reimbursing customers for scams becomes more and more normalized, FIs have to take combatting scams more seriously. We're seeing a ton of scams being blocked with our real-time monitoring products, putting a barrier from a payment being released immediately to the scammer. And our new counterparty risk consortium will help banks get signals on the destination of funds and whether the bank account was ever associated with a scam. We're really excited to take this challenge on 💪 Check out our full report in the link below. #fraudprevention #scamdetection #fintech #payments #banking #creditunions

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Larry Pruss that also assumes the BNPL companies report to the bureaus. So, assuming they do, who's to say BNPL doesn't emerge as a negative signal in the scoring algorithms? I'll point to the counterintuitive yet well-known fact that revolving credit utilization around 15% is the peak contributor to a tradeline in FICO-like scores. I can rationalize the actuarial science around this; a zero balance and resultant absence of payments of course is an antipattern that doesn't prove the psychology of the customer. In other words, "does this person forget to click a button or write a check (what's that now?) once a month, irrespective of the amount?" I digress. My point here is: will BNPL emerge as a negative signal if it's correlative with an inability to obtain traditional credit? I'll counterpoint myself here too: will the ubiquity of Apple cause such a land rush of BNPL usage that it washes out any negative signal since it'll see utilization across the spectrum? Of course, there's a huge number of perfectly good banks and credit unions that ought to be lending money to their depositors, if only there were a way to make that interesting again...

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Headwinds Galore in Payments! Small wonder that Boston Consulting Group (BCG) says Fortune Favors the Bold! Tech modernization is non-negotiable, but many seem to be just getting around to reading that memo as the music stops and global revenue growth estimates are cut in half. The #GenAI gap is currently gargantuan: - 85% of financial services companies recognize GenAI as transformational, yet only 18% have a clear strategy, and just 7% have fully implemented GenAI teams. - BCG anticipates GenAI reducing customer service costs by 70%. - Klarna currently anticipates $40 million in customer experience (CX) savings. - Stripe is driving operational efficiency by embedding GenAI in its developer portal. - MasterCard and Visa are deploying GenAI to enhance fraud detection. Familiar disruptive forces have also intensified for banks, with 6,500+ Fintechs maturing on the $125 billion the sector has attracted over the past 25 years. Shifting centers of gravity entirely away from banks. - Primarily with digital wallets and vertically integrated stacks—think direct links between consumers and payment processors.Block, Shopify, and Toast. - Some banks are now seeking up to 50% of their new growth in g from offerings outside their core business. - Timing could be better, as the ship has sailed on prime returns in the payments sector, which were once on par with the tech industry. - Total shareholder return (TSR) has sunk to average market levels, and investors are overwhelmingly seeking efficiencies and profits. - Banks are also tasked with delivering instant #payments - Along with increased associated compliance costs in addition to those driven by the recent surge in GenAI fraud. - Getting on board efficiently with digital currency adoption and #CBDCs also requires collective action, which has proven notoriously difficult for banks to achieve. Payments markets in LatAm and MENA are anticipated to grow by 9% & 7% respectively. However, the overall effects of a 50% drop in global growth, compounded by depressed balance sheets in Europe, could challenge many incumbents’ ability to allocate resources to both of these growth markets for some time. https://lnkd.in/eeYc-bNK

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Apple BNPL changes are bigger than Apple Pay Later wind down. Wells Fargo and Bilt - is this Goldman 2.0? Is Figure going to be a powerhouse in the 2ndary market and provide a fully private alternative to Fannie/Freddie? Interesting thoughts from Alex in #Fintechtakes.

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Breaking News 📰: The U.S. Department of Justice is going head-to-head with Visa, planting a dramatic shift in the landscape of the payment industry. Here's what you should know about the ongoing saga: The Fiscal Face-Off: The DOJ has accused Visa of turning the U.S. debit card market into a 'personal piggy bank', hitting it with a potential lawsuit. Alarm bells ring as Visa shares take a considerable dip in after-hours trading. Market Switch-Up: This justice push spells out a golden opening for bank tech firms like Fiserv and FIS to bolster their stance. Attention shifts to Visa's security tech as experts query its role in the U.S. Department of Justice's probe. While payment tech growth blurs regulations, the industry expects some clarity to emerge from this investigation, radically impacting future operations and market evolutions. 🃏👑 The Endgame: Is Visa's reign as reigning debit card king about to end? Or will the company manage to swipe away these allegations successfully? https://lnkd.in/gNbNfWy9 This legal battle represents a pivotal moment in the world of finance. #VisaLawsuit #AntitrustAction #FinTechDisruption #PaymentIndustry

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After a period of shake up in the #BankingAsAService market, Stripe goes big on #EmbeddedFinance. This is still an early stage market, with considerable opportunity for next gen players and innovative incumbents who can create high impact, strategic relationships with non-finance brands...More on how at Embedded Finance & Insurance Strategies

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Virtual card numbers were the best thing since sliced bread (thank you Apple, Capital One & the leaders!) More changes coming-- one of them, one card, multiple banks! "The biggest change coming for Americans will be the ability for banks to issue one physical payment card that will be connected to multiple bank accounts. That means no more carrying, for example, a Bank of America or Chase debit card as well as their respective credit cards in a physical wallet. Americans will be able to set criteria with their bank — such as having all purchases below $100 or with a certain merchant applied to the debit card, while other purchases go on the credit card." #banking #creditcard #cybersecurity #fintech

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Walmart's secret fintech weapon revealed ---------------------------------------------- Walmart's fintech startup One just launched its own BNPL offering, going head-to-head with Affirm. But here's the real story... Walmart is making a bold play to own the entire lending experience. By cutting out the middlemen, they'll have total control over the customer relationship, data, and profits. I believe this is just the tip of the iceberg. The infrastructure behind embedded lending has reached a tipping point. White-label platforms like Jifiti are making it drop-dead simple for retailers and banks to launch their own custom BNPL products in weeks, not years. Imagine the power of combining Walmart's scale with a fully branded BNPL experience, tailored to each customer's unique profile and shopping habits. It's like having your cake and eating it too - all the control of an in-house build with the speed of an off-the-shelf solution. Walmart's move is just the first domino. Who's next? 

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Wells Fargo Bilt Cobranded Credit Card for Rent Payment. No MDR on Landlord. No Surcharge on Cardholders. Juicy Rewards Points for Cardholders ~ https://archive.ph/3q7M5. When consumers charge rent to their cards, a third-party company sends a check for that amount to the person or entity the cardholder says is the landlord. Two Plan v. Actuals Deviations: 1) Non Rent: Wells assumed that around 65% of card-purchase volume would be nonrent, generating interchange-fee revenue. The reality is inverted. 2) Transactor Not Revolver: Wells expected that around half to three-fourths of dollars charged to the card would carry over from month to month, generating interest charges. The reality ranges between around 15% and 25%. While anybody can face this challenge, when it says Wells on the outside, you can never rule out fraud on the inside. Exactly opposite of "Why nobody got fired for buying IBM"

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Citi leans on tech modernization to fix data quality management failings. The company invested more than $12 billion in technology last year. They say that they have reduced the time it takes to book loans, automated controls for their traders to reduce errors, moved risk and analytics to a cloud-based infrastructure and increased the resiliency of their platforms to reduce downtime. Citi spent about $3 billion last year on transformation related work and plan to increase that this year. #digital #banking  #technology

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The Synapse mess—years in the making—just got a whole lot messier. The once-fast-growing Banking-as-a-Service (BaaS) provider filed for bankruptcy in April. Now, it has cut off services to some of its bank and fintech partners, including Evolve Bank & Trust and Mainvest, and stranded tens of thousands of consumers and businesses without access to their funds. What’s transpiring between Synapse, some of its bank and fintech partners and their connected customers is a dramatic case-study-in-progress of the potentially significant third-party risks posed by BaaS providers to bank and fintech partners. There were red flags for years before Synapse suddenly shut down. The fallout from its failure makes clear that bank-fintech BaaS partnerships—and by extension, the customers they serve—could be jeopardized by unforeseen operational and regulatory risks. The BaaS market is dominated in the U.S. by Cross River, Piermont Bank, Celtic Bank, Stride Bank, N.A., The Bancorp, and Blue Ridge Bank, among others, many of which have already faced regulatory enforcement actions and some of which are rethinking their BaaS partnerships. My latest for FIN: The Fast Forward on Fintech looks at the warning signs leading up to Synapse's collapse, the expectation that banks will face stepped up enforcement actions, and why the Synapse fiasco is not likely to dampen enthusiasm for the BaaS market, which is projected to experience explosive growth globally between 2024 and 2031.

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In today’s regulatory landscape, the ramifications of non-compliance with Anti-Money Laundering (AML) guidelines are profound, and rightly so. Neglecting these standards creates an ecosystem ripe for illicit activities driven by nefarious actors. Equally critical is implementing robust monitoring tools to detect and mitigate suspicious activities. A banking and finance sector representative recently had a pressing requirement for @ID, uncover potential false-flag accounts linked to organized crime. Their initial estimates, utilizing existing internal controls, customer vetting processes, and adherence to best practices, suggested the existence of a few hundred nefarious accounts. However, leveraging the advanced network analytic capabilities delivered by @ID, tens of thousands of false-flag accounts were identified and proactive remedial action was taken. This approach empowered the financial institution to address, reassess and refine its compliance strategies, enhancing its defenses against future incidences and mitigating associated reputational risk. In this ever evolving environment of sophisticated financial crime, utilizing @ID’s industry leading capabilities to enable enhanced due diligence is critical to support your organizational responsibilities relative to AML, KYC, and CFT compliance. For further information on how @ID can enhance your due diligence and compliance program, contact me, Lawson Brophy, or Matt Winlaw to discuss how we can assist you in safeguarding your clients and your reputation.

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Thanks to Robin Garrison, CAMS-AUDIT for this share. I'm still making my way through the SEC's 2025 Examination Priorities report and it looks like I have an OCC report to read as well. No worries! We'll break this one down for you too. Keep your eye on this page for more details. #compliance #OCC #banking #BaaS #fintech #compliance

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🏦This is a great overview of a neo-bank crisis that is unfortunately impacting a lot of individuals who used tech “banks” for their personal savings. It’s a pretty sad situation for those folks. 😞 The good news is that it doesn’t seem to be a full scale banking run like we had last March. And I don’t see any direct impact on startups, as they tend not to use the actual neo-banks that were impacted. One item is popping out of this at me - many of the neo-banks claimed FDIC insurance. But now that the tide has gone out, it’s unclear who actually is insured. How does an account at a “not a bank” neo-bank need to be held at the actual FDIC insured bank to count as being covered? We need some guidance here from the regulatory agencies!!

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