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In an era where digital innovation is reshaping banking, the focus on security has never been more crucial. This article delves into the symbiotic relationship between the emerging trends in neobanking and the robust protection provided by VPN safeguards. By dissecting the transformative impact of neobanking on traditional financial systems, the article highlights the need for adaptive security measures.
It then seamlessly transitions to the role of Virtual Private Networks (VPNs) in bolstering privacy, thwarting cyber threats, and ensuring encrypted connections. Through insightful analysis and real-world examples, the article navigates the dynamic landscape of modern banking security and unveils how the convergence of neobanking and VPN technology is poised to secure the financial realm of tomorrow.
The emergence of neobanks has had an irreversible impact on traditional bank systems. Unlike traditional banks, neobanks are digital-only, meaning that they don’t have physical branches that users can visit. This means that the whole customer experience and journey with a neobank is digital. With this comes different types of security issues, as online banking has its own particular vulnerabilities. As you don’t need to enter a branch in person in order to use a neobank, it’s at greater risk of phishing, credit card fraud, and other cybercrime tactics.
The neobank Chime has attempted to deny account takeover fraud with their customers – according to Forbes – who explain that an investigative consumer reporter became involved with a customer’s dispute with the neobank after she found her account was emptied of funds.
With customers struggling to get neobanks to return their funds after falling victim to fraud, it’s no surprise that they’re becoming less trustful of neobanks in general – Fortune found that only 47% of neobank users believe that their institutions “do what’s right”. So what are customers doing to protect themselves, and what can neobanks do to protect themselves and their customers?
Customers are turning to VPNs to ensure that their networks are private: they can make sure that their connections are encrypted.
A VPN can encrypt your sensitive data so that criminals – and companies alike – can’t see your web traffic (and your real IP address). As your data: “goes to a VPN server, where it changes your IP address and your visible digital location… The receiver of your data will not be able to see where the data originally came from.”
So, does that mean that customers can protect themselves during online banking with the help of a VPN? Yes, it can be helpful if they want to bank in a public space such as in a cafe or library. It can also be a great option when banking using a mobile app, such as when you want to transfer funds while on the go rather than from a secure network at home.
VPNs can be a potential issue to neobanks, however, as criminals may sometimes choose to use them in order to hide their IP address. As you can see from the above, it’s not always the case that customers using a VPN are fraudulent – rather – they might be legitimate user who is simply hiding their traffic while banking on a public Wi-Fi connection.
In fact, that it’s advisable for customers of neobanks to use a VPN in order to protect themselves since they can prevent someone from intercepting your banking activity.
However, some traditional banks choose to block any customers who try to access their funds while using a VPN. This means that many customers are moving to banks that allow for VPNs without blocking them. However, this can potentially enable fraud, as it makes it more difficult for them to identify whether customers are legitimate or not.
As more and more customers use VPNs, especially with neobanks, this causes a potential issue for them in terms of identifying their customers. As fraud is on the rise with neobanks, security should be a top concern. In fact, that neobanks like Monzo, Starling, and Revolut are even more the target of fraud than traditional banks, leading to a growing level of customer complaints.
So, how do you balance the seamlessness of a customer’s journey while they’re using a VPN while maintaining the security of your service?
Fraud prevention and detection software like device fingerprinting can spot customers who are using a VPN by assigning each user a unique hash based on their combination of software and hardware. This might utilize a scoring system in order to help distinguish between suspicious users simply using a VPN or those with more “red flags,” such as using a Tor browser or having an email address that’s not linked to social media accounts.
Another solution is using VPN detection software, which can allow a user to pass through your system with no additional checks needed – or it gives you the option to block a user outright (or require further information from them.) As SEON explains in their VPN detection guide, “fraud detection solutions conduct VPN detection tests to assess whether a VPN is being used and combine the findings with hundreds of other data points to collate a complete profile of the user action.” Like with device fingerprinting, a user is then provided with a risk score.
So how does it work? SEON says that VPN detection tools look at features like “network volume, known IP addresses, and packet headers (pieces of data transmitted when the connection is being made.” As customers are provided with a risk score, this means that legitimate users who just happen to be using a VPN don’t experience any additional friction to their customer journey, while those who are suspicious or known criminals either have to provide more information or can be blocked outright.
VPNs can protect customers while they’re using neobanks in public places, such as when they need to transfer funds on the go. In fact, it’s an incredibly logical solution to safety concerns for many users who are worried about their online transfers being intercepted by criminals on less secure Wi-Fi spots. However, it’s still good practice for neobanks to use VPN detection tools in order to separate legitimate users behind a VPN from criminals using them in order to undergo fraudulent activity.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.