How Fintech Is Ensuring Secure International Money Transfers

Innovations in the digital money and international money transfer market have opened the world to a whole new range of convenience, speed, safety, and accessibility in real-time payments and transfers.

But as with most things, where good exists, you would also find some traces of bad. International money transfers are no exception.

Hence, it comes as no surprise that while most businesses and individuals are taking advantage of cross-border money transfer platforms for payments and remittances, some bad actors are also using or manipulating these platforms for fraudulent activities.

As at 1992, less than 1% of fraud reports received by the FTC were related to cross-border payments, but by 2022, it was more than 11%, according to the FTC.

To combat this threat, the leading fintech platforms are implementing more proactive measures to secure money transfers. These measures are instrumental in boosting consumers’ confidence in these platforms, leading to an uptick in the use of international money transfer apps for global remittances and cross-border business in the past few years.

Today, we’ll take a quick look at some of the common security risks in international money transfers and what fintech platforms are doing to curb and eliminate them.

The Security Risks in Traditional and Digital Money Transfer

Some of the commonly reported fraudulent activities in traditional and digital money transfers include:

• Man-in-the-middle attacks or phishing: This usually occurs when a fraudster exploits communication gaps between a sender (business/individual) and an international money transfer recipient, thereby getting the sender to send money to the wrong recipient.
• Account takeovers: These takeovers occur when a cybercriminal gains unauthorized access to a user’s account and utilizes it for their gains, usually as a result of inadequate encryption and weak authentication in legacy systems or the use of weak passwords.
• Fake remittance services and fraud schemes: Some bad actors are also getting into the market, posing as genuine remittance services, government agencies, or investment schemes to dupe unsuspecting consumers out of their money.

Data breaches and third-party vulnerabilities also pose a common threat in the international money transfer industry, usually as a result of some traditional money transfer platforms not implementing proper/impossible-to-crack security architecture in their systems. 

Fintech’s Security Architecture: Core Components

With solid security protocols, most of the security risks prevalent in cross-border money payments and remittances are easily addressed.

Below are some of the core components used by modern fintech to fortify their security architecture:

End-to-end encryption (E2EE)

The best online platforms for fast international money transfers use complex encryption algorithms to mask sensitive data, including their customers’ personal information, authentication data, and transaction details.

E2EE ensures that these sensitive data are in an unreadable format, such that even if a cybercriminal intercepts them, they won’t be able to make sense of them.

Multi-Factor Authentication (MFA)

MFA systems add multiple layers of user authentication to money transfer platforms by introducing various credentials a user must provide before they can access their account.

For instance, major international money transfer platforms from the US, such as BOSS Money, require that you use a combination of different verification factors to access your account.

To send money to Colombia or other countries, you will provide various authentication elements, which may be two or more of the following: one-time password, face ID, biometrics, device verification, CVV checks, and others.

Hence, even if someone else has your PIN, they will be unable to work their way through the biometric, face ID, and other checks thus preventing them from accessing your account.

 Tokenization and Data Masking

Similar to E2EE, data masking and tokenization are encryption algorithms used by fintech platforms to protect and obscure their sensitive data by replacing the actual data with a fake one or a meaningless token.

With these features in place, hackers are unable to exploit sensitive data on the platform as they only have access to fake data with no real application.

Secure APIs and Zero Trust Frameworks

Advanced fintech platforms for international money transfer typically include multiple layers of security in their API gateways and also embed zero-trust frameworks at various points (including devices) through which customers access international money transfer services.

With zero-trust frameworks, digital money transfer apps and systems are alert 24/7, always watchful for unusual activities and taking appropriate actions to block access or transactions immediately they detect unusual activity.

BOSS Money, for instance, has built-in anti-fraud detection alerts that automatically flag attempts at unauthorized access and other unusual activities.

Beyond these core components integrated into the fintech security architecture, blockchain and AI security protocols have also been very instrumental in addressing security threats in cross-border payments.

 Advanced Threat Detection Through AI & ML

Innovations in AI applications in the financial sector have, in many ways, enhanced how digital money transfer platforms proactively approach and address cyber threats.

AI and ML security algorithms are advanced to the point that they can manage system-wide threats while equally assessing and addressing threats to individual users on the platform in real time.

Some key applications include:

• Real-time transaction analysis to detect and flag suspicious behavior.
• Proactive fraud prevention measures, including Geo-fencing, velocity checks, and behavioral biometrics for monitoring transaction activities and patterns.
• Adoptive learning to recognize evolving fraud patterns via machine learning algorithms that continuously detect and analyze security threats. This approach allows AI systems to develop new and more accurate ways of tackling threats, even as cybercriminals improve their strategies.

This level of advanced threat detection is undoubtedly more than has ever been witnessed in the global financial sector.

Blockchain and Decentralization for Security

Blockchain brings a high level of transparency and security to financial systems, making it possible for international money transfer platforms to securely store encrypted, time-stamped, permanent, and immutable records of every transaction ever made.

As a result, cross-border payment settlement times have gotten incredibly shorter.

More so, blockchain-integrated international money transfer platforms utilize cryptographic verification and consensus mechanisms to validate access while keeping customer data anonymous.

The application of blockchain, AI, ML, and other new technologies has also led to some advancements in cross-border payment regulation and compliance measures.

Regulatory and Compliance-Driven Security

Generally, regulators are introducing stricter compliances and regulations in cross-border payments and remittances due to the increasing number of risks in the sector.

From anti-money laundering (AML) safeguards and know-your-customer (KYC) safeguards to General Data Protection Regulation (GDPR) and Payment Services Directive 2 (PSD2) regulations, many compliances have been refined to ensure that international money transfer service providers implement all measures necessary to reduce security risks while providing efficient service.

To ensure compliance, money transfer platforms are occasionally subjected to third-party security audits to evaluate and validate the effectiveness and efficiency of their cybersecurity protocols in protecting customers’ information and preventing malicious attacks.

Compliant platforms usually have SOC 2 / ISO 27001 certifications to show for it.

Beyond protecting user data and activities, fintech platforms are also charged with implementing automatic sanction screening and politically exposed persons (PEP) screenings to prevent high-profile political individuals from engaging other users to commit money laundering or other financial crimes.

 Emerging Security Trends in Fintech Money Transfers

As the fintech market continues to evolve, we are seeing a new crop of advanced security features in the sector, including:

• Decentralized identity (DID) and self-sovereign models: This eliminates the use of third parties and traditional banking systems while giving customers more control over their personal data and allowing for more private and secure cross-border payments.
• Homomorphic encryption: An encryption algorithm that allows confidential data processing by enabling fintech platforms to process money transfers without having to decrypt customers’ sensitive data.
• Quantum-resilient cryptography: Advancements in quantum computing have fueled fears that with the help of quantum computers, malicious actors may soon be able to crack through any form of encryption. Quantum-resilient cryptography algorithms are designed to potentially future-proof transactions and secure customer data from quantum attacks.

The fintech market is also seeing a rise in the use of secure enclaves and hardware-based security systems like trusted platform modules (TPMs) to enhance identity-based data integrity, authentication, and security across hardware devices.

Conclusion

It is true that fintech innovations have brought much-needed convenience, speed, safety, and accessibility to international money payments and remittances.

But it is also true that overall data security is still a work in progress – not just in the financial sector.

As a business owner or individual who frequently utilizes cross-border payment/remittance platforms, there is an absolute need to ensure you are doing all you can to protect your accounts and transactions and avoid the various security risks associated with international money transfers.

It all starts with registering only with reputable and the best online platforms for fast international money transfers.

Going for platforms with very clear and extensive privacy compliance, such as the California Consumer Privacy Notice, is a good start.