Fintech frauds show need to balance convenience, safety

Even if the convenience of financial services through the internet is enhanced, it is meaningless unless security is ensured. It is necessary for the public and private sectors to reconstruct safety measures so that customers can utilize online financial services with peace of mind.

The number of cases in which malicious third parties illegally withdraw customers’ money through online financial services has been increasing. At SBI Securities Co., a major online securities firm, about ¥100 million was illegally withdrawn from the securities accounts of six customers.

It was a scheme in which a third party acquired the identification numbers and passwords of securities account owners, illegally logged in to the accounts to sell stocks and get money, opened bank accounts falsely using the names of the real securities account owners and then transferred the money from the stock sales into them.

If such crimes continue, the credibility of online financial services could be shaken. Investigative authorities are urged to do their best to uncover the criminal methods and detect the perpetrators.

About 190 cases of unauthorized withdrawals of money from bank accounts by abusing NTT Docomo Inc.’s e- money payment service have been confirmed at 11 banks as of Sept. 23, with the damage totaling about ¥28 million.

At Japan Post Bank, bank accounts have also been used to illegally withdraw money by abusing services provided by payment service providers other than NTT Docomo. Seven companies, including PayPay Corp., were confirmed to have suffered damage. An illegal remittance using a debit card with Japan Post Bank’s prepaid function was also found.

To remove the anxiety of users, it is indispensable to take thorough preventive measures.

What cannot be overlooked is the fact that the fraudulent actions have exploited the gap between payment service providers and banks in their cross-industry partnerships. It could be that each side heavily relied on the assumption that the other party was taking measures.

To confirm someone’s identity when linking a bank account to an online payment service, twostep authentication is effective. However, many of the companies hit by the fraudulent actions have not introduced the system.

At a press conference, Bank of Japan Gov. Haruhiko Kuroda urged banks to practice proper risk management covering their business partners. The entire industry, which is tasked with online financial services, should tackle the problem.

There are also many points that need to be reviewed in dealing with the problem after the fraudulent actions were uncovered. It is said that in some cases, NTT Docomo shops initially did not respond appropriately to inquiries from victims, saying that they could not disclose information.

It took a week for NTT Docomo to hold a press conference after it received the first report from a bank about the damage. Japan Post Bank was also late in disclosing the facts.

Every possible effort must be taken to minimize the damage by disclosing specific information promptly.