Developing The Application of Anti-fraud Technology to Enhance Financial Risk Management

[Editor’s note: This is a blog post from Dennis Duan, Vice President of HuaXia Finance and CEO of HuaXia Mobile. Huaxia Finance is a gold sponsor at LendIt Fintech USA 2018, which will take place on April 9-11, 2018 in San Francisco.]

As an executive growing up in the technology field, I have been seeking a deep integration of technology and finance to enhance the power of financial technology. With the development of Internet Finance in China, we have extensive experience in this area. The gradual maturity of anti-fraud technology has played an important role in the healthy development of the Internet Finance industry, especially in the enhancement of financial risk management.

For example, in the field of online lending, users with dubious intentions may apply for loans in batches through the use of software programs or other methods to get a‘cash-advance’ illegally, forming a mini-Ponzi scheme. The scale of these instances of fraud is aggravated by the use of ‘automated’ user registrations and applications in bulk by robots or other software. The anti-fraud technology is built to detect and alleviate these problems and avoid the liquidity risk of lending service platform and the associated losses of its real users. The common practice in the market is to establish a risk management system to carry out layers of screening by using various methods including risk modeling, data analysis, encryption technology and third-party cooperation, etc. However, cases of fraud sometimes still occur. Therefore, it is necessary to further develop financial risk management through the enhancement of anti-fraud technology.

Going forward, I am very pleased to see that anti-fraud technology application is becoming more mature and sound, which will further improve financial risk management capabilities. Specifically,

First, the trend of the integration of online and offline.

With the maturity of the underlying technologies such as artificial intelligence and blockchain, the manual driven anti-fraud method will be closely integrated with artificial intelligence driven anti-fraud method by incorporating the online and offline scenarios, constantly and quickly generating a surge in innovative strategies from the previous unidirectional and inefficient strategy. For example, providing more scientific and intensive reference rules for the original risk modeling and manual costumer service verification by integrating the artificial intelligence data analysis. We assume that if the voice and emotion recognition technologies are applied in the verification audit process, it will significantly improve the efficiency and accuracy of the anti-fraud system. Based on this trend, we have already deployed the HuaXia Finance Investment Team to invest in an anti-fraud technology company called FireRadar. We hope to use early-stage security testing, big data analytics, machine learning, and neural networks to increase fraud prevention and the monitoring and analysis of risks throughout the operational life cycle.

Second, pre-warning mechanism to build the first firewall of anti-fraud.

The current application of anti-fraud technology is a rule engine driven approach, that is, it can detect the problems when the frauds are triggered but cannot predict and warn in the early stage. By accumulating and studying the data of fraudulent activities and developing the new cyber technology, the application of anti-fraud technology is expected to be turn from passive investigation into active pre-warning to build up the first firewall of anti-fraud. Adding intervention techniques out of the rule engine, such as neural network technology, will help to improve the pre-warning mechanism.

Finally, the focus of anti-fraud competition will be the ability to drill down and apply information from data.

The development of anti-fraud technology relies heavily on data and data analysis. However, as the data market continues to be regulated, user data security is being taken more seriously. The key is to protect the users’credit information and analyze the data efficiently, which is the competitive advantage within anti-fraud.

About the author: Dennis Duan, VP of HuaXia Finance, and CEO of HuaXia Mobile

Mr. Dennis Duan, with a Master of Engineering from Huazhong University of Science and Technology, is a senior information systems specialist with more than 10 years of professional experience. Working as the CTO (Chief Technology Officer) of CreditEase’s Peer-to-Peer platform Yirendai, he helped the company successfully list their IPO. He has also worked on the well-known Chinese social networking site Douban as the VP of Engineering. Mr. Duan led technology teams and R&D at Google, Huawei, HappyElements, OpenTV, and other established companies in China.

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