newsletter

Leveraging data in the fight against fraud

758

The widespread, pandemic-induced digitisation that has come about in the last year or so is arguably the most significant change that has impacted businesses, and for that matter our daily lives, for many years. Even as the pandemic slowly comes to an end – we hope – the way we conduct business and our daily tasks might never return to what we once considered “normal.”

The implications of this digital shift are profound. The most obvious example is perhaps the rise of digital banks and the e-commerce sector, but one can also think of the increased popularity of remote working. Yet digital platforms are more liable to a potential source of very damaging disruption: fraud.

With the help of technology, fraudsters’ arsenal has become more sophisticated over the years. Fortunately, so have the tools of fraud fighters. SEON has risen to rank among the most successful Hungarian startups by providing fraud prevention solutions to a wide range of businesses. Tamas Kadar, co-founder and CEO of the company, explained to us what underlying dangers digitisation brings, and how leveraging Big Data can help us take on a new generation of fraudsters.

The story of the successful fraud-prevention company start in 2017, when the crypto-enthusiastic Tamas himself often fell victim to fraudsters. Tamas met with Bence Jendruszak, the second co-founder of SEON, while studying at the Corvinus University of Budapest. Their shared interest in cryptocurrencies prompted them to create a crypto exchange platform for users in the Central and Eastern European region.

“The problem with this idea was that the safety of our digital assets was compromised by fraudsters,” Tamas explains. “We soon realised that there were no adequate security firms to help out with this issue. This is what sparked the idea that we should create our own fraud prevention solution.”

This is how SEON – an abbreviation of “Security Always On” – was established in 2017. The startup raised €1 million in a seed investment round in early 2019. It began making a profit only two years after its launch. In March 2021, SEON secured a €10 million investment from Creandum in what is the largest Series A investment round in Hungarian startup history to date.

Creandum is the venture capital firm known for backing, among others, Spotify, Klarna, and Bolt.

The pandemic and lockdowns kickstarted a wave of digitisation; digitisation to an extent that we have not seen before. In 2020 alone, the share of e-commerce in global trade raised from 14% in 2019 to 17%. This digitisation exposed firms to new forms of fraud threats that many of them were not prepared for.

“Due to the Covid-19 outbreak, many industries were compelled to adapt to different ways of operating,” Tamas explains. “In other words, they had to go online to survive. While this turned out to be fantastic for the businesses that managed to go digital quite fast, the situation has also provided online fraudsters with an opportunity to defraud the new online businesses.”

It seems that the new businesses want to enter the digital world, but seem to be quite unprepared for what’s waiting for them. As the world goes more and more digital, our experience tells us that even key players and entities are still unprepared for the risks that lie online.

There is a growing demand for fraud prevention, and we’re pretty set on meeting the demand for “well-known fraud threats. While a majority of fraud happens the same way as before, like email phishing, chargebacks, and account takeovers, we’ve seen new forms of fraud developing. There is a rise in synthetic identities, deepfakes or SIM swapping attacks that need to be tackled.

SEON aims to tackle all these challenges. With the big ambition of becoming the number one firm in the fight against fraud globally, the startup recently opened its new Global Headquarters in London. It has also established its presence in the North America and Asia Pacific regions by opening offices in Austin, Texas and Jakarta, Indonesia.

This global expansion is unsurprising given just how global SEON’s customer base now is, one which also spans a wide range of industries: from e-commerce to financial services to online gaming and gambling. To offer a few examples, SEON has partnered with up-and-coming membership platform Patreon, airfare giant Air France, the market-leading Hungarian OTP Bank, and countless gambling sites such as Bwin, Ladbrokes, and Eurobet. To cater for the specific needs of all these different companies, SEON has developed two main software tools.

In Tamas’ words: “Data enrichment is an essential part of SEON’s success. One of the firm’s core competencies is collecting publicly available information of people such as name, BIN number, email address, social media accounts and browser tools, phone and more.

“The main objective of our Intelligence Tool is to help our customers with data enrichment from the incoming user’s IP and email addresses, phone number, and social media presence to aid risk-related decision-making. This essentially allows our clients to have a “360 degrees view” of their customers, and to filter out fraud attempts with the click of a button.

“For instance, if someone with a specific name applies for a small loan at an online lender, but their email address and phone number which he used for the application are matched with different social media accounts, you can infer that this person is not who he or she claims to be.”

SEON’s other product, the Sense Platform, is an end-to-end fraud management system that leverages machine learning (ML) to spot sophisticated fraud attacks during signups, transactions, or within the context of promotional programs.

“The only way to pore over vast amounts of data is to turn them into insights through machine learning tools,” Tamas outlines. “Hence, once a large scale data set is created, it is time to feed it to a ML model to analyse, report, and reveal insights.”

What we mean by that is that once we have our data, a ML model delivers readable rules through a Decision Tree algorithm. Each applied rule creates a new branch where the nodes are clear parameters. Combining data enrichment with machine learning is what improves risk-based decision making, and maximises resources to fight against fraud.

Fraud prevention has proved to be another area where using machine learning and artificial intelligence (AI) can bring about considerable improvements in efficiency and results. Furthermore, as we rely more and more on digital platforms in our day-to-day life, more and more public information is becoming available about us online. While this might be a concern in general, fraud prevention can leverage this data to make online platforms a safer space.

SEON has surpassed all expectations surrounding the startup so far, and is now well on the way to become the best-known, and most reputable, fraud-fighter globally. But, as Tamas himself noted, the company has a bigger goal: eradicating all fraudulent activities.

Author: Benjamin Jenei

#Digitisation #Data #FraudDetection #DigitalBanks #Ecommerce #BigData #Crypto #ArtificialIntelligence #AI #MachineLearning