Podcast: Austin Capital Financial institution CEO Erik Beguin on AI-driven fraud

Whitney McDonald 12:04:39
Whitney, howdy and welcome to The Buzz a fin AI information podcast. My identify is Whitney McDonald and I’m the editor of fin AI information. Fin AI information has rebranded from financial institution automation information, marking the subsequent step in our mission to steer the dialog on innovation and Monetary Providers Know-how. Becoming a member of me right now, November 18, 2025 is Eric start, CEO of Austin capital financial institution. Eric is right here to debate the state of fraud in monetary providers right now and easy methods to navigate an atmosphere the place AI is each streamlining fraud for unhealthy actors and supporting safety at FIS. Thanks for becoming a member of us, Eric. Nicely,

Erik Beguin 12:05:14
excellent. Whitney, thanks a lot for having me. Yeah. So Austin capital Financial institution is a financial institution positioned in Austin, Texas, we’re a few half a billion {dollars} in property rising fairly quickly. I believe we grew about 60% in property final yr. And we focus on digitally delivered merchandise nationwide. We construct our personal, say, FinTech merchandise. Now we have merchandise for credit score constructing. And our most up-to-date product that we’re launching is a product designed to guard American shoppers and small enterprise from fraud. In my opinion, I’m a non conventional banker, and I actually take into consideration banking in neighborhood as a set of shoppers or set of small enterprise house owners with frequent unmet wants, versus being geographically positioned in shut proximity. So we serve clients in all 50 states throughout the nation. Good.

Whitney McDonald 12:06:03
Nicely, you talked about one of many merchandise that you’ve got is to deal with the state of fraud right now. Let’s type of speak massive image. We’ll get into what you guys provide, and we’ll get into Fort Knox particularly. However why don’t you type of inform me about the place we stand right now, the state of fraud from that, from that broader lens,

Erik Beguin 12:06:22
Whitney excellent, fraud is a very giant drawback and rising exponentially. There are estimates for fraud vary anyplace from like, I believe there’s an FTC estimate from $12 billion of shopper losses a yr to the Aspen Institute simply put one thing out that estimates fraud could be $150 billion of losses to Individuals in only one yr. And when no matter these these numbers are, they’re really understated, as a result of when someone is the sufferer of fraud, generally they don’t notice they’ve been defrauded. Generally they’re in denial that they’ve been defrauded, and generally they’re simply too embarrassed to inform anybody that they’ve been defrauded. So regardless of the fraud numbers are, and they’re giant and rising quickly, they’re understated. So fraud is an enormous drawback, and it’d even be a what some would possibly contemplate a safe nationwide safety menace at this level.

Whitney McDonald 12:07:13
Now, we will’t actually speak about fraud or monetary providers or something as of late with out speaking about synthetic intelligence, and identical to monetary establishments and tech suppliers are investing in AI, fraudsters are clearly additionally leveraging the know-how to defraud folks. How is fraud making it simpler for fraudsters? What are a few of these threats that monetary establishments and shoppers alike needs to be watching out for

Erik Beguin 12:07:41
Yeah, that’s a fantastic query, Whitney, and what, what actually has occurred is fraud has moved from, you already know, the hacker and the hoodie of their mother’s basement into giant companies with 1000s of staff. And I take advantage of the phrase staff deliberately, not workers. These are people who find themselves normally tricked into coming into some nation the place they’re primarily held hostage, and the businesses are run by legal syndicates in these secure haven nations, and there could be 1000s of workers in a compound, and they’re utilizing the easiest in know-how. They’re investing in know-how as a result of they’re making billions and billions in {dollars} a yr in fraud features. And so they flip round they usually use that, they usually vest it to identical to a enterprise, proper? They’re within the enterprise of fraud to maximise the features they get. In order that they have the very best instruments, they’ve the very best know-how. There’s really coaching on psychological easy methods to psychologically break someone down, after which these staff are punished if they don’t herald cash. So what would possibly they do? So up to now, each American ought to know that every one of our data has been offered and is obtainable readily on the darkish net. And so up to now, I might say these efforts have been extra broad based mostly and hodgepodge by these corporations, however with AI, they will now particularly goal a person shopper. They’d say, like, I need to goal Joe Smith. And they’re going to have aI get all the knowledge for Joe Smith, after which particularly goal Joe Smith. Like, the place does he financial institution? What’s he concerned with? Go learn his social profile, all these items, after which then resolve on the kind of assault they could do utilizing AI, and earlier than this could be an especially laborious course of, taking a whole lot of hours, and identical to a standard enterprise, like they need to make investments, they need to get the utmost return on the hours they make investments, however with AI, they simply speed up these efforts and make them a lot broader, in order that. Crimson is rising exponentially with AI.

Whitney McDonald 12:09:42
Now I type of needed to speak slightly bit right here about what to do to stop that fraud. Look ahead to that fraud. Authentication is likely one of the matters that I needed to speak by way of, and that additionally type of bleeds into Fort Knox as effectively. However authentication isn’t all the time, you already know, the right resolution. What are some examples of authentication that ought to or perhaps mustn’t, be trusted,

Erik Beguin 12:10:04
excellent. So authentication for for years now, we’ve been utilizing usernames and passwords. All people’s received usernames and passwords, and everyone has too many username and passwords to allow them to’t keep in mind them. So most individuals really recycle their username and a few passwords. And the unhealthy factor is, is, if the hackers ever break into one web site together with your username or password, and I believe it’s one thing like I had the stats right here someplace, it’s like 60% of Individuals reuse their identification. 62% of Individuals reuse their username or password, after which the fraudsters will use these username and passwords that they get off the darkish net, they usually’ll do what’s referred to as credential stuffing. And they also will go in and they’re going to attempt to use these credentials on each banking web site or monetary web site that that shopper is related to. And 50% of login makes an attempt use credential stuffing, proper? So username and password, I believe the time of the person and password is shortly coming to an finish. I additionally assume one time use textual content codes. These codes may be intercepted pretty readily, in order that that’s multi issue authentication for all of your listeners, proper? You’ve received username password, and I’m going to ship you a textual content code. I can I can trick you into I should purchase your username and password, and I can intercept your your textual content code, and I can readily entry your clients monetary providers, apparently, additionally the place banks have been transferring to form of authentication and utilizing AI for voice recognition authentication. I imagine the CEO of OpenAI got here out and stated, AI has already defeated voice recognition. And so there are some corporations that use voice recognition to name and ensure a commerce, and I believe that the times of that being a safe technique of authentication are over. So username, password, one time, textual content, code to a to an unsecure cellphone quantity, and voice recognition authentication, I believe all of these are possible on their means out. So the place are we going? So, proper? Nicely, we’ve changed that, yeah. So, you already know, I believe the issues the place we’re going is biometrics, for certain, and I believe we’re going to on gadget biometrics and we’re going to off gadget biometrics. And there’s a distinction between these two. I can go into extra element in the event you’re involved in that. I believe we’re going into person habits and gadget habits. And actually that is the place AI can are available in and say, okay, is that this gadget being utilized in a spot, in a fashion that will be typical of a human, proper? After which it might be typical of this particular person. After which onto the biometrics match. After which, in fact, it’s a must to defeat dwell picture injection that’s powered by AI on the opposite facet. However I believe we’re going to finish up in a world like this, the place it truly is your gadget, your biometrics, after which additionally what you already know, so some, some form of like problem factor that you already know. And I believe opposite on the on the inverse facet of that’s that one thing that we put in Fort Knox, and I believe that may develop into extra prevalent, is the flexibility for the person to really problem the identification of the financial institution, as a result of there’s a whole lot of scams right now, just like the Phantom hacker rip-off, for instance, the place you already know the financial institution is asking the buyer, but it surely’s probably not the financial institution, and the buyer can’t actually confirm it’s the financial institution. So we’ve in-built the place the buyer can create problem questions, questions for us, and, you already know, Vice like, we need to realize it’s them, after which they will show that it’s us. And we don’t know something about that problem query, besides once you’re on the proper degree of entry, you’ll be able to see like what the reply is to that query on our facet. After which we each know that we’re talking with the meant social gathering

Whitney McDonald 12:13:54
for our listeners which may not know, are you able to share what Fort Knox is and what the innovation behind that’s,

Erik Beguin 12:14:01
yeah, certain, so Fort Knox is, I imagine, America’s first excessive safety banking platform. So about 5 years in the past, I sit in my workplace throughout covid, and I used to be wanting on the fraud panorama, and I simply thought fraud was going to blow up. And I actually noticed this, this conundrum that banks have been dealing with, the place they’re attempting to offer comfort they usually’re attempting to offer safety. And the issue with that is these two issues are basically juxtaposed in opposition to one another. The extra handy you make it to maneuver your cash. 24/7, actual time funds, you already know, P to P funds, the much less safe it’s, and the safer i. You make folks’s cash, the much less handy it’s to maneuver it. And so we actually checked out breaking these two aside. And so what we created is Fort Knox, and it’s actually complementary to the present checking account that you have already got, so that you could have the comfort of your checking account and the safety of Fort Knox to your financial savings. And actually underneath the premise that you just shouldn’t preserve all of your cash in a single bundle. And whereas you want the flexibility to shortly transfer cash for funds, you’ve gotten your utility cost, you’ve gotten purchases and whatnot, and people are all hooked up to your spending account, your checking account, you don’t want the flexibility to ship your cash immediately in a single day to sub Sahara Africa or Southeast Asia to your financial savings account. And so actually, you break these two aside and Fort Knox, dot financial institution excessive safety financial savings focuses solely on financial savings, and it has a complete host of mechanisms to maintain your financial savings secure and nonetheless will let you have the comfort of your present checking account.

Whitney McDonald 12:15:38
Now our listeners ought to learn extra about that. I’ll plug up that we have now lined that financial savings account as effectively. For extra particulars about that. Now we have, you already know, lined that too. Now you talked slightly bit in regards to the starting, and that about this at first, and also you simply talked about Fort Knox as one instance. However you actually do have an entrepreneurial mindset. You search for these wants, and also you attempt to innovate in opposition to these wants of the market, fraud being one. Some other improvements within the pipeline? What’s peaking your curiosity proper now? Perhaps even simply an method to the way you method know-how at Austin capital, however but additionally, you already know, by way of the improvements that you just provide you with, however something within the pipeline? What’s, what’s, you already know, sparking your your curiosity? Yeah. So we

Erik Beguin 12:16:26
have an present product line referred to as credit score robust, proper? Now we have a whole bunch of 1000s of purchasers on that. We had near 1000 on daily basis, and that’s actually for folks with no credit score, then credit score or spotty credit. And actually what we’re seeing over there may be a whole lot of and that is what received us into the fraud area. Is also a whole lot of identification theft and artificial identification theft and first social gathering fraud. So we have now a whole lot of curiosity in that. We’re constructing out some information instruments that we’d share with another banks. They’re very within the analytics that we’ve developed right here. So we’re taking a look at that, after which actually we’re taking a look at Fort Knox right now, it’s designed to guard your financial savings for shoppers, account takeover. And company account takeover is an enormous drawback for small enterprise. The losses there are a lot bigger and the variety of folks you can doubtlessly compromise are a lot bigger, as a result of all they want is one worker to make use of enterprise e mail compromise, for instance, get right into a enterprise and simply monitor and simply wait and get entry to these industrial accounts. So Fort Knox goes to broaden to defending small enterprise money reserves, after which it’s going to broaden into funds and receivables. Now we have a complete product product roadmap for Fort Knox to offer these excessive safety measures. Won’t ever be an all encompassing financial institution with Fort Knox, as a result of it should carve off the items that should be extremely safe and safe these and nonetheless will let you preserve your present banking relationship and the pliability and the relate the in all probability native relationship that you’ve got there. I believe the issues that we might hit on is that training will not be sufficient. All people’s been preaching training for fraud prevention for thus lengthy and and it simply doesn’t work as a result of the fraud assaults are so subtle. I believe we additionally must deal with defending our elders. Over 50% of fraud makes an attempt are in opposition to people who find themselves 60 years or older. And so to boost our efforts, actually, we have to have a look at structurally constructing services which have safety and fraud prevention constructed into the product to guard the buyer once they simply aren’t conscious of what they even should be protected against.

Whitney Mcdonald 12:18:44
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Transcribed by https://otter.ai