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Shifting markets and the rise of the global Covid-19 pandemic pushed the payments industry to evolve. With cash payments falling to the wayside, mobile money transactions and other contactless payments surged forward. According to the GSMA’s 2022 State of the Industry Report on Mobile Money, mobile money adoption broke records by reaching $1 trillion (USD) in 2021, as well as reaching a total of 1.35 global registered accounts – an 18% increase when compared to 2020. 


Digital transactions and payments have grown immensely in popularity over recent years, pushing more consumers into the space. Unfortunately, fraudsters, money-launderers, and other criminals have also been eager to take advantage of unsuspecting digital consumers. 

In this article, we discuss the shifting landscape of digital transactions and payments. We cover the key insights you need to know about the state of the digital payments industry in 2022 including shifts in consumer behavior, a rise in new digital money laundering and fraud techniques, and challenging customer authentication standards.  

Shifts in Consumer Habits & Digital Behavior 

The changing behavior of digital transaction consumers drives merchants to innovate and bring new technology to the playing field. In turn, these new introductions of technology further push consumers toward increasingly digital expectations for their payment technology providers. 

In June 2021, PwC released its latest edition of the Global Consumer Insights Pulse Survey. According to this report, consumers are more comfortable with digital transactions than ever before, with 39% of respondents shopping directly from a mobile device either daily or weekly. A further 23% stated they shop online at least once a day. 

With this growing trust in digital transactions comes greater convenience for both customers and businesses. However, a heightened risk of money laundering and fraud also accompanies an increase in digital payments, as regulation is largely still varied and untried. 

Businesses of all kinds that deal with digital payments and transactions need to focus more heavily on anti-money laundering (AML) and fraud prevention – specifically, on enabling quick customer onboarding, ensuring payment security, and employing transaction monitoring software that looks for suspicious patterns.  

The Risk of Money-Laundering in Digital Transactions 

In more traditional payment systems that require individuals to visit an in-person bank branch or financial institution to complete transactions, money laundering is more difficult to carry out. 

Yet, with the rise in popularity of digital transactions, the ability for money launderers to effectively hide behind digital identities and accounts has increased as well. 

For instance, the International Centre for Trade and Sustainable Development (ICTSD) reports that roughly 10% of laundered money is moved through the highly popular money transfer platform PayPal. Moving money through these kinds of digital platforms makes it far more difficult to trace transactions to their origins – thus, preventing legal authorities from efficiently detecting illegal activity. 

While PayPal has worked to change its policy to help prevent such money laundering, many other less-regulated digital money transfer platforms pose the same risk. 

According to HP Threat Research, this risk is heightened by the use of micro-laundering – a type of money laundering where money is moved via thousands of small digital payments that are more difficult to detect.  

Dealing with the Threat of Authorized Push Payments 

Authorized push payments – or APP fraud – is a type of financial fraud in which criminals manipulate their victims into making payments to bank accounts controlled by the fraudsters. 

APP fraud attacks are designed to bypass security controls and convince the victim that the transaction is real and trustworthy. The most prevalent form of this is business email compromise – or BEC – in which fraudsters impersonate a known and trusted business or source, asking for transactions such as: 

  •       Invoice payments 
  •       Contractor payments 
  •       CEO purchase requests 
  •       Instructions for customers making major purchases (residential homes, land, etc.) on how to wire the payment to the supposed company. 

During the first half of 2021, the UK saw a sharp 71 percent increase in APP fraud – with the amount of money stolen surpassing card fraud losses for the first time – according to a 2021 UK Finance press release. This rise in APP fraud resulted in a loss of £355.3 million, including: 

  •       £129.3 million was lost to impersonation scams
  •       £107.7 million was lost to investment scams, often promoted on social media
  •       £15.1 million was lost to romance scams, which have been linked to the rise in online dating due to pandemic restrictions

With the growing popularity and the increasing number of decentralized or unregulated financial systems, staying ahead of APP fraud has become even more challenging within the payments industry – making strong transaction and AML monitoring models more important than ever.   

Challenges from High Customer Authentication Standards 

Anytime you deal with payments, there are hefty customer authentication standards to deal with. The type and level of customer authentication needed vary greatly according to the industry or type of business, making the task complex and laborious. 

To make the process of customer authentication simpler for businesses dealing with digital transactions, it is crucial to focus on building a trust framework and optimizing regulation for each industry. This will help to ensure a high level of security for customers who are sharing their sensitive financial data.  

Here are 2 effective authentication standards to consider adopting when working to prevent money laundering and fraud in digital transactions or payments:   

  1.     FIDO (Fast ID Online): FIDO is a set of customer authentication standards that can be used to enable a business or payment service provider to authenticate customers with ease and security. With the FIDO authentication market forecast to grow to more than $565 million by 2031, this is one of the fastest-growing authentication standards. There is an increasing demand for FIDO in the BFSI, retail, and government sectors.  
  2.     Video KYC with Geotagging: KYC (Know Your Customer) is a set of standards for verifying a customer’s identity used primarily in banking to authorize various financial services – including digital transactions and payments. Video KYC with geotagging takes this authentication a step further by enabling remote verification through the use of live photo/video and live location (geotagging) technology that authenticates both the customer’s identity and physical location.  

Businesses dealing with digital payments need technology that does not hinder the customer onboarding process. The longer it takes to onboard, the more likely the customer is to move on to a different product or business partner. 

Final Thoughts 

To achieve the best strategy for enabling digital transactions and payments while also preventing money laundering and fraud, your business needs the right solutions, such as those that offer powerful and efficient customer authentication and AML transaction monitoring. 

Here at KYC Hub, we offer a wide range of solutions to help our clients complete their due diligence without disrupting their business processes. Our services are designed to be both accurate and painless, with solutions including: 

And so much more! 

To learn more about KYC Hub’s innovative solutions, request a demo or talk to our product specialist today!

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