Biometric-based fraud is the largest threat currently facing financial service providers, Michael Marcotte, co-founder of the National Cybersecurity Center (NCC), explained in a warning to banking executives.

Banks are coming under an increasingly intense barrage of cybersecurity attacks, and many of these now use deepfakes and generative AI to make the initial breach. Presentation or liveness attacks have surged 40 per cent this year, as malicious actors attempt to undermine video-based KYC procedures.

This means that synthetic identity fraud is now the fastest-growing category of financial crime in the US – and costing banks as much as $6billion.

Marcotte’s warning comes following the RSA cybersecurity conference, where leading academics, entrepreneurs and corporations discussed pressing security issues.

Now, Michael Marcotte, CEO of artius.iD, a digital ID and authentication firm, is calling on the cybersecurity industry to put banking at the top of the agenda.

“The emergence of generative AI tools like Midjourney which anyone can use, and the rapid proliferation of deepfakes online, means that banks are at the wrong end of an acute digital identification and security crisis – and their current practices, protections, and technologies are miles behind the curve,” he explained.

Marcotte continued: “Banking KYC processes are still relying on ID card, face, and address verification – these procedures look neolithic against deepfakes and AI-powered identification fraud. These supposed guardrails, which in many banks still rely on software from an era when the only AI was Skynet, are rendered completely obsolete in the face of hackers who can generate documents and deepfakes to leapfrog facial and ID verification.”

“A 10-year-old in their bedroom can now produce convincing deepfakes or use AI to generate a fake license in a matter of minutes – in the hands of crooks and thugs, this is a deeply worrying prospect.

Battling biometric fraud

Identity verification platform Sumsub revealed it saw the number of deepfakes detected worldwide increase by 10 times from 2022 to 2023, in the latest edition of its Identity Fraud Report. Firms continuing to use dated means of verification and user authentication could pay if they do not make changes.

Marcotte explained: “There needs to be a radical shift – one option available for banks is to relinquish control of KYC data and use decentralised storage providers. If custody of the data remains in the hands of the individual, then banks won’t open themselves up to litigation or expose their customers to fraud. As deepfakes proliferate, a trickle of lawsuits has the potential to become a flood – and one which absolutely could sink the banks.

“Biometric-based fraud is now the greatest threat to the international banking system – and executives are asleep at the wheel. Criminals circumventing KYC checks expose banks to a range of liabilities: identification theft, fraud, and money laundering are just some that could be on the cards. This doesn’t even begin to factor in the harm to their customers, future litigation, or the incurred catastrophic reputational damages.

“Banks not only have a fiduciary duty to their shareholders, who will see reduced returns as they haemorrhage revenue in these scams, but also a responsibility to stakeholders in wider society as well. If consumers and corporations lose trust in these institutions, then entire economies are put at risk.

“Banking execs need to wake up and realise just how much the ground has shifted beneath their feet – KYC procedures are already looking like relics, and if banks continue on this path, they themselves will become fossils as newer fintech startups step into the security vacuum they’ve left.”

Customer loyalty is key for the long-term survival of any company. What ensures good customer loyalty is an experience they enjoy – in the Middle East and Africa (MEA) region, this means creating a fast, seamless transaction. Amazon Payment Services’ latest research supports this as it reveals that 81 per cent of businesses believe revenues would increase if transactions were faster.

This is just one trend of many revealed in the Leading Trends in Digital Payments: Driving the Real-Time Economy in MENA report. Based on a study designed and conducted by Davies Hickman Partners and sponsored by Amazon Payment Services, this report comes as part of the re:Imagine Payments thought leadership forum, designed to help inform merchants and those interested in digital payments.

The MENA region remains one of the most dynamic and fast-growing in the world, with ambitious government strategies and visions. Some of these include the Saudi Vision 2030 and We The UAE 2031. In MENA, as elsewhere, customers are making more digital payments. Less cash is used in-store and online retail sales are rising. Technology continues to revolutionise payment processes and the Amazon Payments Services report set out to reveal how.

Based on quantitative data and insights from over 100 executives responsible for payments in businesses across Saudi Arabia, the United Arab Emirates (UAE), and Egypt, the report outlines leading payment trends, indicating their relevance to businesses in the region. In-depth interviews with these executives in MENA provided insights, perceptions of the industry, and predictions.

“The region’s own digital trajectory is rapidly moving forward,” said Peter George, managing director of Amazon Payment Services in MENA. “Our commitment to businesses goes beyond delivering robust and innovative payment solutions. It extends to helping businesses understand how they can effectively embrace transformation within payments.

“This report outlines leading trends and valuable industry findings shared directly from inspiring leaders across today’s regional landscape, setting merchants up for success to enhance their customer experience and achieve sustainable business growth.”

Identified trends 

The top five predicted drivers of change, as ranked by the executives, are the introduction of bank accounts linked to national identity, the growing use of digital wallets, better payment experiences, payment fraud reduction, and improved biometric authentication.

The report also highlights four leading trends expected to play a major role in business and customer payment decisions over the next five years.

Speed is key

Digital payment enhancements are taking on critical importance for businesses in the region: 81 per cent of businesses surveyed in the report said if payment transactions were faster, revenues would increase. One reason for this is that customers are often busy and time-poor. Therefore, if a transaction takes too long, they may stop short of completing it.

Similarly, 83 per cent of executives said that fast checkout and payment completion are important factors in building customer loyalty. Almost a third of businesses expect to grow more than 20 per cent in 2024. Consequently, digital payment innovations take on significance for sustainable success.

More ways to pay

One of the identified trends is the rise of omni-pay advances. Governments and fintech companies drive these initiatives, offering diverse payment options. Examples include open banking, stablecoins, and central bank digital currency, aligning with the real-time economy’s demand for immediate services.

Fintech innovation and payment fragmentation—where a business is able to offer multiple payment choices across different points of sale and media—were rated among the top 10 payment drivers of change for the next five years by the executives surveyed. Overall, 89 per cent of the executives said they engage with fintechs to improve payments for their business.

Understanding consumer desires

Consumers want immediate access to goods and services, often facilitated by digital technology. This real-time economy was rated the top consumer driver of change by the executives in the report. In fact, 64 per cent of whom said it would be very important over the next two years.

One key building block is the growing use of digital wallets, which 87 per cent of the executives surveyed said were becoming the preferred way for customers to pay. Improving payment experiences through social commerce is another growing priority: 59 per cent of executives would like to advance social commerce. Meanwhile, 54 per cent say that their customers would likely use livestreaming to buy products and services promoted by social media influencers.

Security is at innovation’s core 

The executives in the report were clear that new ways of paying will not be adopted unless payment security is in place. Security centricity is the third leading trend identified in the report. Businesses need robust security measures to earn customer trust, with biometric authentication and data privacy playing pivotal roles.

For 68 per cent of businesses surveyed, earning customer trust was the most important reason to deploy new payment methods. Regulators and payment providers need to help businesses feel confident about the security guardrails when introducing new payment methods.

Adapting to artificial intelligence (AI)

Another trend identified in the report concerns innovation driven by AI adoption in payments, as new technologies transform payment efficiency and personalization.

Recent developments, including the emergence of generative AI, are amplifying the impact of this trend. According to the report, 52 per cent of the executives surveyed expected significant changes in payment methods within as little as two years. Fifty-three per cent said that immersive shopping experiences with augmented reality technology would be very important.

Along with these leading trends, the report also presents five building blocks for payments strategies:

• trust
• choice
• experience
• behavioural change
• sustainability

Together, these topics illuminate the complex and evolving landscape of digital payments in MENA and the imperative for businesses to continue learning to adapt, innovate, and grow.

Payments platform Paysafe has launched Pay by Bank for iGaming and sports betting, a new solution enabling American players to instantly and securely fund wagers directly from their online bank accounts, as well as enabling them to quickly withdraw winnings to their bank accounts. 

This product expands the capabilities of the Paysafe ‘Gateway’, the iGaming payments solution connecting US operators to the market’s most comprehensive range of traditional and alternative payment methods via a single integration.

Paysafe added Pay by Bank in response to the growing demand from US players for a greater number of payment choices. The Gateway already connects operators’ cashiers to Paysafe-processed card payments, digital wallet, the Paysafecash online cash solution, and third-party payment products.

Strengthening operators’ player acquisition, Pay by Bank provides customers with a payment option that is particularly appealing to the 27 per cent of bettors who prefer transacting via direct bank transfer, according to Paysafe research.

According to Paysafe research transactional speed and financial security are players’ top two priorities regarding their payment experience. By leveraging Paysafe’s single-integration Gateway, US online gaming operators can now offer Pay by Bank to their customers and give first-time users the ability to sync their checking or savings account in just seconds, and then fund their player account securely in real-time.

For operators, all Pay by Bank transactions are indemnified, reducing liability if a player’s deposit from their bank account defaults. Along with helping to drive player acquisition by providing more payment choices, Pay by Bank’s other benefits for operators include strengthening customer retention by improving the overall payment experience.

Winnings can also be withdrawn from players’ sportsbook accounts just as seamlessly, with Pay by Bank enabling rapid payouts directly to linked bank accounts, again initiated through a single click.