Rapid FinTech Growth Adds Risk to Inbound Account Funding

The quick growth of neobanks and FinTechs has put an increased emphasis on secure money movement. Ingo Payments CEO Drew Edwards details the challenges in money movement and their solutions in the new PYMNTS eBook, “The Implications of Uncertainty.”

Navigating the uncertainties surrounding inbound funding sources from financial institutions, wallets and FinTechs has become a top priority for businesses as we round the corner into the second quarter of 2024. With the emergence and quick growth of neobanks and non-traditional financial institutions, there is an increasing emphasis on ensuring secure money movement into accounts, accompanied by a new level of uncertainty regarding the reliability of funds moved into accounts.

Funding an account through various channels — such as ACH, checks and card-based transactions — carries an inherent risk of fraud and potential losses for financial institutions. While it may look like funds have been received and are “good,” many players are learning the hard lesson that even honest consumers often have 90 days or more to claw back funds that may have already been moved or spent.

The presence of truly bad actors seeking to fraudulently fund accounts exacerbates these risks, creating an environment of uncertainty that threatens the growth, stability and even viability of these emerging financial entities. The transactional costs associated with inbound funding can be dwarfed by the true cost inclusive of bad debt.

In all this uncertainty, luckily, there are solutions that can be leveraged effectively which include risk management and, in some cases, good funds guarantees. Robust payment partners equipped with extensive historical data on fraudulent activities, nationwide footprints and advanced technologies like machine learning and artificial intelligence (AI) offer an inroad to stability for these financial institutions. By identifying patterns, detecting anomalies, and preemptively identifying fraudulent behavior, these partners play a crucial role in minimizing the risks associated with inbound funding.

Collaborating with risk management partners that have long track records at managing risk is and will become even more imperative for companies looking to safeguard their inbound funding transactions. The need for robust risk management solutions with a history of excellence will only intensify, making strategic partnerships with reliable payment partners indispensable for navigating the complexities of the modern financial landscape.

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