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Combatting Banking Fraud with SiS-id: A unique solution for preventing corporate payments fraud using AI and blockchain

Periodic Reporting for period 1 - COBAFRA (Combatting Banking Fraud with SiS-id: A unique solution for preventing corporate payments fraud using AI and blockchain)

Reporting period: 2019-01-01 to 2019-06-30

Corporate banking fraud is a fact of corporate life today. Fraud is increasing with 70% of French companies reporting fraud or attempted fraud in 2018. More specificaly, supplier fraud is the most common type of fraud attempt in France, home country of our company. Fraud is also becoming a multi-facets phenomen growing in sophistication. Fraud attempts are changing in nature as fraudsters become more professional, organized and resourceful. As a result, sucess rates are higher and more money is taken.

Our solution has been built on companies’ willingness to work together and mutualize resources and information to address this matter. The French companies with whom we built the solution (the pioneers) aimed to set up a collaborative solution based on mutualisation/pooling: regarding enrollment and payment data.

We developed an innovative platform based on AI and blockchain technology in order to reduce costs of fraud prevention and recovery and consequently support the competitiveness of European businesses. This solution is highly secure thanks to the blockchain which authentificates the data. This program can be set up on existing system in a short time (1 to 2 months deployment).
We offer a fully up-to-date repository of suppliers’ bank contact details (based on the combination: IBAN / company identification number), reinforced payment security and we also propose an insurance policy to cover fraud. We provide an independent and open solution. The company is neither in the payment field nor offers a payment tool. The solution can be integrated within different existing tools and allows for industrialization.

Coporate banking fraud has several negative effects:
- Significant costs for the companies affected, both from the fraud itself and on the costs incurred subsequently (second payment to the supplier, audit, implementation of new security policies),
- Loss of trust between trading partners,
- Negative atmosphere: fraud had some dramatic consequences in companies impacted (suicide, waves of layoffs),
- Negative impact on the reputation of the company.

Our overall objective is provide European companies with a solution that give them the insurance that electronic payments are sent to the right recipient. We believe My SiS-id (the platform) has the potential to significantly reduce the risk of fraud in Europe, reduce costs of fraud prevention and recovery and consequently support the competitiveness of European businesses.

Beacause fraud is cross-border and the problem is a global one, our 13 pioneers accounts have already shared their intention to deploy the solution in other countries where they have particular interests. A first set of priority countries has been identified based on countries exposure to fraud, payment factory and cash-pooling concentration,but also based on the feedback from our pioneer accounts: Belgium, Germany, Holland, Poland, Spain, Switzerland, United-Kingdom, Italy. SiS-id has closely collaborated with local early adopters to adapt the solution to each country.

The feasibility study allowed SiS-id to specifically quantify the scalability of the model and identify the target countries with the optimum need. We have identified that My SiS-id will be commercialized/deployed in countries using the IBAN as standard. Finally, the commercialization will be extended to non-IBAN countries by 2021.
Sis-id is currently facing a relatively immature market, where the stakeholders do not clearly perceive the added value of our solution, until the company in question is facing fraud. Our approach is to support our pioneers and early adopters, whom are convinced of the value of our solution, to ensure optimal deployment of our solution (complete enrollment of their suppliers base).

Based on the list of prority countries established with the help of our pioneers, SiS-id has closely collaborated with local early adopters to determine the interest for our solution in each country surveyed.

Our methodology combined active research involving visiting and talking to companies in the field (partners and subsidiaries of our pioneer accounts and others) in different countries, and desk research. It has included market analysis, cost benefit analysis, intellectual property analysis and technological development analysis. It has been conducted by SiS-id employees and experts where necessary.

We carried on a complementary study via United Motion Ideas, a web application making potential markets accessible for market research. In addition, we used the networks in which we are present: the French Association of Corporate Treasurers and the ONLYLYON network.

During this feasability study, we engaged in interviews with 41 pertinent stakeholders representing 35 companies in 8 countries. The profile of the interviewees was for a large part of them CFO's or Treasurers but we also engaged with consultants and experts on the subject, banks, academics as well as agent responsible of the fraud.

As expected, this study shows that all the countries studied are sensitive to the phenomenon of fraud but that there is still significant market education to carry on regarding the value proposition of our solution that does not seem obvious at first sight. Each company surveyed has processes in place to ensure the effectiveness of payments made and to protect themselves against fraud attempts. The devices presented appeared to us on the one hand extremely time consuming as well as demanding and on the other hand easily circumventable technically.

Our solution being based on obtaining banking and corporate identifiers we also studied the cost of obtaining this information according to the following grid: information provider, source reliability, transmission channel, price. We started to examine the cost of development of APIs between those database and our solution.

The value proposition of our solution is obvious. On the other hand, the market surveyed has not yet fully understood this value. The contact and interest for our solution appeared moreimportant in the contacts transmitted by our French pioneers. The Belgian, Swiss and UK markets are the countries in which the deployment of our solution is the most interesting.
The trend is heading towards dematerialization. Thus data with significant value becomes the target of criminal networks for which disciplinary sanctions are less important and the cost / benefit ratio is profitable. Computer-related attacks, such as identity theft, represent a real threat that is not without impact on the competitiveness of European companies. If large companies manage to recover from this type of attack, for less important structures it is a blow often fatal. A firm that closes means destroyed jobs.

From a societal point of view, the challenge of our solution is to appease internal and external relations by securing companies' relationship with their customers Thus, companies can focus on the development of their activity.

At this stage, our goal is to ensure that our solution is properly deployed among our clients and future clients. We have not foreseen a major technical innovation in the short term if it is not to improve the fluidity of our enrollment process and the reliability of our Blockchain. It would be counterproductive to embark on the development of a solution that would not meet any need or request previously identified.
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