[Editor’s Note: American Banker had some inaccuracies in their coverage of this story so you should read their corrected piece here. Suffice it to say that much of the featured story below is inaccurate as we relied on American Banker’s initial coverage].
Fraud is going to be top of mind for all financial institutions in 2024. Banks and fintechs alike are constant targets of fraud attacks.
It was interesting to read this morning about the experience of Regions Bank when it comes to check fraud.
A large regional bank based in the South, Regions was under fire from the CFPB for their overdraft practices. So, they added a feature pioneered by fintechs: access to pay two days early. But it had some unintended consequences.
In late 2022 Regions Bank introduced Early Pay and updated its policies so bank customers would receive their pay the same day Regions receives the money. The normal hold time at banks is two days.
This has led to a surge in fraud losses, $135 million between April and September 2023. Their Q3 loss of $53 million was up 40% year over year. They have now amended their policies putting a longer hold on large deposits and fraud losses are expected to be $25 million in Q4.
This points to the dance that all banks and fintechs must do. How do you provide a frictionless experience for your customers while at the same time mitigating fraud? There is no easy answer as this battle will continue.
I also should point out a recent white paper we released in partnership with Resistant AI on serial fraud. We need a wide array of anti-fraud tools to thwart the bad guys these days.
The Alabama-based bank loosened its funds availability policy in 2022 as part of an effort to give customers early access to their paychecks. “We opened the door too wide, bad people came rushing in, and we didn’t close the door timely enough,” Regions’ CFO said.
With community banks pulling back on lending to small businesses vertical software platforms are filling the void. They provide software, of course, but are increasingly also providing access to capital.
Global: Former Anthemis partner soft-launches new fintech-focused venture firm Ruth Foxe Blader has left her role as partner at Anthemis Group after nearly seven years to start her own venture firm, Foxe Capital, TechCrunch learned exclusively today. Blader is joined by former Anthemis investment associate Kyle Perez. Sophie Winwood is serving as an operating partner.
USA: An Inside Look at Ally Bank’s Measured Roll-Out of GenAI Q&A: As financial institutions race to implement AI across their organizations, public anxiety and government scrutiny are intensifying. Can banks deploy and leverage AI to power growth while avoiding public backlash? Ally Bank’s approach – simultaneously trailblazing and prudent – is one promising model.
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Peter Renton is the chairman and co-founder of Fintech Nexus, the world’s largest digital media company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series.