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Tips and Tricks: The Best Ways to Avoid Fintech Scams

The use of fintech has been on the rise for several years now, and it’s an excellent option for start-ups looking to streamline their operations and digitize important processes. However, in 2022, it was reported that fintech companies lose $51 million to fraud on an annual basis. This is an industry that focuses on developing financial technology, so statistics like this are truly eye-opening. This figure highlights the fact that even the sector that’s trying to digitize online financial systems and services falls prey to scammers. 

It makes sense then, that as the fintech industry continues to thrive and it increasingly comes under attack, the risk of falling victim to scams and fraudulent activities increases too. However, this certainly isn’t a reason to stop using it, as the benefits far outweigh the risks, especially if you know how to manage them.

With the convenience and accessibility offered by financial technology, it’s essential to stay vigilant and employ smart strategies to protect yourself and your start-up from potential threats. In this article, we’ll break down several methods you can use to increase your start-up’s digital safety awareness and protect your finances and any sensitive information. 

The Truth About Staying Safe

If you consider yourself to be rather tech-savvy, you might think you’re relatively safe from scammers and hackers. You’d never send money to a Nigerian prince, and you know to check the email address before you open something masquerading as an online banking notification. You may even have a password that doesn’t contain your name.

Despite all this, you may not be as protected as you think you are, and as a start-up business, you certainly have far more risks than an individual. Not only do you need to utilize numerous tools to get your business going, you also probably have a few stakeholders that use these tools too. This means that your employees or associates can put your business at risk without you even knowing it. Many people also believe that because their start-up is small, they are not a target. However, hackers don’t only target big businesses. The bigger the business, the more likely it is to employ stricter cyber security measures, making it harder to target. 

In contrast, start-ups are far smaller and tend not to focus as much on security, making them the easier option. Scammers are also less likely to get caught as start-ups don’t have the resources to chase up threats.

As fintech grows and changes, it’s easy to get caught up in the hype around a product and end up subscribing to malicious software that could compromise your digital safety. However, if you follow this advice, your start-up and all its stakeholders can potentially avoid most fintech scams:

Choose Reputable Platforms 

When engaging with fintech services, opt for well-established and reputable platforms. Do your research, read reviews, and check for certifications or licenses that validate their legitimacy. Stick to platforms that have a solid track record and a strong presence in the industry. Also, check the credentials of any product and ensure that they are compliant with local laws. Many fintech products store data that is subject to data privacy laws or regulations, and you don’t want to compromise your customer or company data by sharing it unlawfully. In doing so, you open yourself up to scams and make your start-up more vulnerable to attack.

As for any product or service available online, no news is bad news. Even very niche products have an online footprint in the form of reviews, tutorials, and debugging threads. If there’s little to no information about a fintech product online, stay well away from it. The chances are, it’s a fly-by-night scam that has yet to establish an online footprint. 

Verify Security Measures 

Before providing any personal or financial information, ensure that the fintech platform employs robust security measures. Look for indicators such as SSL encryption technology, secure login processes, two-factor authentication (2FA), and regulatory compliance. These measures are vital in protecting your data from unauthorized access.

Most of these security measures will be outsourced to various familiar platforms. Software sites very rarely employ their own security measures and will use other software to contact your bank for two-step identification for the most part. If a 2FA message or request doesn’t look familiar or it’s not a usual part of your transactions, this is a red flag. Don’t allow a transaction to be completed before you’ve confirmed the security measure is legitimate. 



Be Wary of Phishing Attempts

Phishing is a common tactic used by scammers to trick individuals into revealing sensitive information. Be cautious of suspicious emails, messages, or calls requesting personal or financial details. Avoid clicking on unknown links or providing information unless you are certain about the legitimacy of the source. 

While this has been common online knowledge for almost as long as emails have existed, phishing is still a major method scammers use to bait their victims. Their methods have become more and more complex, and smishing is now common too. This involves the use of a bogus text message that usually has a sense of urgency behind it and encourages the recipient to click a link or download a file quickly before a set time limit passes. 

Double-Check URLs

Scammers often create fraudulent websites that mimic legitimate fintech platforms. Pay attention to the website URL that appears in your web browser’s address bar. Check for slight misspellings, added characters, or variations that may indicate a fake site. Always ensure you are accessing the official website of the fintech service provider.

When in doubt, always double-check or type the URL yourself, rather than clicking on an email or other link. 

Protect Your Passwords

Create strong, unique passwords for your fintech accounts and change them regularly. Avoid using personal information that’s easy to guess, such as pet names or birthdays. Consider using a password manager to securely store and generate complex passwords for different platforms.

Password managers are probably the most effective way to keep your login data safe. Your password manager will generate passwords that not even you know to avoid hacking techniques like keylogging. 

Enable Multi-Factor Authentication

Whenever available, enable multi-factor authentication (MFA) for your start-up’s fintech accounts. MFA adds an extra layer of security by requiring additional verification, such as a unique code sent to your mobile device, in addition to your password. With MFA, even if your password gets compromised, unauthorized access may still be preventable.

If you have employees who access fintech tools to release payments, it’s a good idea to implement a two-step process whereby one person sets up the payment and another authorizes it. This creates a real-life multi-factor authentication process that ensures no single person in your start-up can complete a financial transaction without secondary approval. 

Be Cautious of Unsolicited Offers

Beware of unsolicited offers that promise quick financial gains or ask for upfront fees. Legitimate fintech services don’t typically make unsolicited offers with unrealistic returns. Be skeptical of any requests for payment or personal information from unknown sources.

A general rule of thumb is don’t trust it if it’s too good to be true. This can apply to potential return on investments or unrealistically long free trials. Unless you’ve agreed to pay for something (legitimate) don’t enter your card details into any site ever. Even reputable sites will sometimes activate stop orders on your behalf that can go unnoticed for months. 

Regularly Monitor Your Start-ups Accounts

Checking your financial accounts and transactions on an ongoing basis for any irregularities or suspicious activity is crucial. Regularly review your statements, activity logs, and notifications provided by your fintech platform. Report any suspicious or unauthorized transactions immediately to your provider.

Using a reputable tax filing platform is also recommended as it ensures you won’t easily fall victim to fintech tax scams. By relying on a tax filing platform that you’re familiar with, you’re less likely to open correspondence from nefarious sources or click on links that are supposedly offering you a tax refund from your bank. 

Educate Yourself & Your Team

Stay informed about the latest fintech scams and fraud techniques. Follow reliable sources and subscribe to updates from reputable financial institutions and regulatory bodies. Educating yourself and your team about common scam tactics can help everyone to recognize warning signs and protect your start-up effectively. 

You can hold training sessions to ensure everyone is aware of what a scam may look like, or you can ask all the stakeholders involved in your start-up to watch webinars on the subject and educate themselves. Whatever route you choose, ensure that everyone clearly understands how important the topic is.

Trust Your Instincts 

Trust your instincts and exercise caution when dealing with fintech services. If something feels too good to be true or raises suspicions, take a step back and investigate it further before proceeding. 

In a start-up environment, there’s often a lot of pressure to act fast to facilitate growth, and there’s a lot going on at once. Don’t get distracted by all the other important business tasks that require attention. If there’s anything fintech-related that requires your input or review, give it the appropriate amount of time and attention. If you rush into something, the consequences could have a long-term, costly effect on your business.   

Don’t Get Caught Napping

By implementing these tips and tricks, you can significantly reduce the risk of your start-up falling victim to fintech scams. Stay informed, be vigilant, and maintain a proactive approach to protect your financial information and enjoy the benefits offered by the fintech revolution securely.

Read About, Best Practices for Sustainable Start-ups


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