Top 10 Fraud Trends in 2023
Fraud is a type of criminal activity that involves the use of deception, misrepresentation, or dishonesty to gain something of value. The term “fraud” can refer to a wide range of illegal activities, including financial fraud, identity theft, and internet fraud.
In the context of mobile banking, fraud can take many forms. One common type of fraud is phishing, where fraudsters use social engineering tactics to trick users into revealing their login credentials, account information, or other sensitive data. Phishing scams can come in the form of emails, text messages, or fake websites that appear to be legitimate banking sites.
Another form of fraud is malware, which refers to malicious software designed to gain unauthorized access to a user’s mobile device. Malware can be used to steal sensitive information, such as login credentials or financial data, or to take control of a user’s device.
Other types of fraud in mobile banking can include fake mobile banking apps, SMS scams, and social media scams. In these cases, fraudsters use various tactics to trick users into providing their sensitive information, often by posing as a legitimate bank or mobile banking provider.
Here are the top 10 biggest fraud trends you need to know for 2023.
Automation has become a significant trend in the world of fraud, where fraudsters are increasingly using automated tools and technologies to carry out their attacks. With the advent of machine learning, artificial intelligence, and other advanced technologies, fraudsters can now automate many aspects of their attacks, making them more sophisticated, efficient, and difficult to detect.
One of the primary ways that automation is being used in fraud is through the use of bots. Bots are automated software programs that can perform tasks such as account takeover, credential stuffing, and phishing attacks at scale. By using bots, fraudsters can carry out attacks more quickly and efficiently, allowing them to target a larger number of victims in a shorter period of time.
In addition to bots, fraudsters are also using automation to bypass security measures and evade detection. For example, they can use automated tools to generate fake identities or to manipulate data to make it appear more legitimate. They can also use machine learning algorithms to analyze large amounts of data and identify patterns that can be used to carry out more targeted and effective attacks.
Another way that automation is being used in fraud is through the use of social engineering tactics. Fraudsters can use automated chatbots or voice assistants to interact with victims, making it easier to trick them into revealing sensitive information or clicking on malicious links.
2. Account Takeover
Account takeover is a type of fraud where a fraudster gains unauthorized access to a user’s bank account or mobile banking account. This type of fraud can be extremely damaging as it allows the fraudster to control the victim’s finances, steal their money, or engage in other fraudulent activities.
Account takeover can occur through various means, such as phishing attacks, malware, social engineering, or brute-force attacks. For example, a fraudster may use a phishing email or SMS to trick a user into providing their login credentials, or they may use malware to steal the user’s credentials from their device. In some cases, fraudsters may use social engineering tactics to convince a user to provide their credentials voluntarily.
Once a fraudster gains access to a user’s account, they can engage in various fraudulent activities, such as transferring funds to their own accounts, making unauthorized purchases, or changing the account’s settings to avoid detection. In some cases, the fraudster may also change the account’s contact information, making it difficult for the victim to detect and report the fraud.
To prevent account takeover, banks and mobile banking providers can implement various security measures, such as multi-factor authentication, automated fraud detection systems, and regular monitoring of user activity for signs of suspicious behavior. Users can also protect themselves by using strong and unique passwords, avoiding public Wi-Fi when accessing their accounts, and reporting any suspicious activity to their bank or mobile banking provider immediately.
3. Adoption of New Digital Payments and Methods
Digital payment platforms and cryptocurrencies have revolutionized the way payments are made, by allowing consumers and businesses to carry out transactions faster, more securely, and with greater convenience than traditional payment methods. These technologies have made it possible to transfer funds across borders, making international transactions much easier and cost-effective. Moreover, these payment platforms have also made it possible for businesses to receive payments more quickly, which can help to improve cash flow and liquidity.
However, with the convenience and efficiency of digital payment platforms and cryptocurrencies comes the potential for increased fraud and identity theft. Cybercriminals can use stolen credentials to carry out fraudulent transactions, resulting in significant losses for businesses and consumers alike. Moreover, these payment platforms may be vulnerable to hacking and other forms of cybercrime, which could compromise the security of the payment system and expose sensitive financial information.
Cryptocurrencies, while still not widely used as a mainstream payment method, are growing in popularity due to their decentralized nature and anonymity. However, the same anonymity that makes cryptocurrencies appealing to users also makes them attractive to criminals, who can use them to carry out illicit activities such as money laundering, drug trafficking, and terrorism financing. Cryptocurrencies are not subject to the same regulations and oversight as traditional financial systems, which makes it more difficult to track and prevent criminal activity.
4. Ongoing Challenge of Balancing Fraud & Customer Friction
Online businesses face a constant challenge in balancing the risk of fraud with the need to create a seamless and frictionless customer experience. This is particularly important in the case of online shopping, where customers expect a smooth and quick checkout process. The more friction or obstacles customers experience during the checkout process, the less likely they are to complete their purchase, which can result in lost sales and revenue.
However, reducing friction in the checkout process can also increase the risk of fraud. Fraudsters can exploit vulnerabilities in the payment system to carry out fraudulent transactions, resulting in financial losses for both the merchant and the customer. This puts online businesses in a difficult position as they must find ways to minimize fraud while also maintaining a seamless and user-friendly checkout process.
The challenge of balancing fraud prevention and customer experience becomes even more complex when dealing with multiple channels, such as web, mobile, and point of sale. Each channel has its own unique risks and vulnerabilities, which require different approaches to security and authentication.
To address these challenges, merchants and issuers are exploring alternative authentication solutions that can help to reduce friction while also improving security. These solutions include passive behavioral biometrics, which analyze user behavior to detect suspicious activity, and passwordless authentication via biometrics with liveness detection, which uses facial recognition and other biometric data to verify a user’s identity.
By leveraging these innovative authentication solutions, merchants and issuers can strike a balance between reducing friction and preventing fraud, thus creating a seamless and secure shopping experience for their customers.
5. Rise of Synthetic Identities
Synthetic identity fraud has become the fastest-growing type of financial crime in the United States and is also a growing concern globally. According to the McKinsey Institute, it currently accounts for 85% of all fraud cases. With this type of fraud, fraudsters create new identities by combining stolen or fake personal information with fictitious identifiers, essentially creating a new identity from bits of real and fake data.
The use of synthetic identity fraud allows fraudsters to evade detection and create a “synthetic victim” that does not exist in real life. This makes it more difficult for organizations to prevent this type of fraud, as traditional identity verification methods may not detect the fraud.
The impact of synthetic identity fraud can be significant, not only for the individuals whose identities have been stolen but also for the organizations that fall victim to the fraud. Synthetic identity fraud can result in financial losses, damage to brand reputation, and even regulatory sanctions.
To prevent synthetic identity fraud, organizations must employ new and innovative techniques to verify the identity of individuals. This includes using advanced analytics and machine learning algorithms to detect anomalies in user behavior and identity verification data. It also involves utilizing multi-factor authentication techniques that use a combination of biometrics, passwords, and other identifiers to verify the identity of users.
6. Escalating Cost of Fraud
The total cost of fraud is becoming a significant concern for organizations, as it includes not only the direct financial losses associated with fraud but also the costs of prevention tools and headcount, as well as the impact on customer lifetime value. Globally, fraud losses are estimated to be around $5.4 trillion, with the cost of fraud in the UK alone accounting for approximately $185 billion in losses, according to the University of Portsmouth. Similarly, in the US, financial services firms have experienced a 9.9% increase in the cost of fraud.
The increase in the cost of fraud can be attributed to the growing trend of people turning to online and mobile channels for shopping and other transactions. Fraudsters have followed suit and are using increasingly sophisticated methods to carry out their fraudulent activities, resulting in higher levels of fraud losses and associated costs for organizations.
To mitigate the impact of fraud, organizations need to invest in robust fraud prevention tools and strategies. This includes implementing multi-factor authentication, leveraging artificial intelligence and machine learning algorithms to detect anomalies in user behavior, and monitoring transactions in real-time. By doing so, organizations can detect and prevent fraud before it occurs, minimizing the direct financial losses and associated costs of fighting fraud.
7. Growing Need for Multi-Layered Fraud Assessment
The digitization of e-commerce and banking is a well-established trend that has transformed the way we conduct transactions, interact with businesses and financial institutions, and access our finances. However, with the increased convenience and accessibility of digital channels, the risk of fraud has also risen, presenting a constant and relentless challenge for organizations across industries.
Despite this persistent threat, many fraud prevention leaders are still relying on limited and siloed fraud management capabilities. This approach involves using multiple fraud prevention tools that operate independently of one another, resulting in a fragmented view of fraud risk and a disjointed response to fraudulent activity.
To achieve the best results in fraud prevention, organizations must take a more strategic and holistic approach that involves orchestrating all relevant data points, risk signals, and customer data into a centralized and balanced response. This requires a comprehensive fraud prevention strategy that considers all aspects of fraud risk, including prevention, detection, and response.
By consolidating fraud management capabilities into a single platform, organizations can gain a unified view of fraud risk across all channels and customer touchpoints. This enables them to better identify and respond to fraudulent activity, reducing risk, customer friction, and associated prevention costs. Furthermore, this approach allows fraud prevention leaders to continuously learn and improve their fraud prevention capabilities by analyzing historical data and applying machine learning algorithms to identify patterns and trends in fraud activity.
8. Targeted Attacks
Targeted attacks are a growing threat in the world of cybersecurity, and they pose a significant risk to both organizations and their customers. These attacks involve cybercriminals compromising an entity’s entire infrastructure, including their network and computer systems. The attackers gain access to critical financial data and can cause significant losses for institutions and their constituents.
Targeted attacks are often conducted anonymously and can take place over an extended period, making them more difficult to detect. These attacks typically occur in phases, allowing the attackers to infiltrate the target’s systems and remain undetected for a more extended period.
While targeted attacks usually occur at the entity level and do not target specific consumers, they still put customer information at risk. Cybercriminals can gain access to sensitive customer data, such as personally identifiable information, financial information, and other confidential data. The loss or theft of this information can cause significant harm to the customers affected and can harm an organization’s reputation.
The impact of targeted attacks on organizations and their customers can be severe, resulting in financial losses, reputational damage, and legal and regulatory implications. It is essential for organizations to take a proactive approach to cybersecurity to protect themselves and their customers from these types of attacks. This includes implementing robust security measures such as multi-factor authentication, encryption, and intrusion detection systems.
Moreover, organizations should regularly assess their cybersecurity posture and take measures to address vulnerabilities and potential threats. This involves conducting regular risk assessments, performing penetration testing, and ensuring that all software and hardware are kept up-to-date with the latest security patches.
9. Heightened Need for Real-Time Risk Assessment
As online and mobile app usage continues to grow, there is a pressing need for comprehensive fraud detection, identity verification, and authentication solutions that work together seamlessly. To meet this demand, organizations need to implement solutions that provide real-time risk assessment, leveraging the latest AI, machine learning, and fraud orchestration tools to manage customer risk collectively and build trust with customers.
One of the primary challenges facing organizations today is the need to provide a seamless customer experience while maintaining a high level of security and fraud prevention. Customers expect fast and convenient online and mobile services, but they also want to feel confident that their personal and financial information is safe.
To achieve this balance, organizations need to implement fraud detection and authentication solutions that work together seamlessly to provide real-time risk assessment. These solutions should leverage the latest AI and machine learning technologies to detect fraud patterns and prevent fraudulent transactions before they occur.
Moreover, fraud orchestration tools can help organizations manage risk across multiple channels, including web, mobile, and point of sale. These tools allow organizations to collect and analyze data from various sources, such as device data, transaction data, and customer data, to detect and prevent fraud.
By leveraging all available risk signals, including behavioral biometrics and passwordless authentication via biometrics with liveness detection, organizations can create a fair and balanced approach to fraud prevention that minimizes customer friction and maximizes customer satisfaction. These solutions help build trust with customers by demonstrating a commitment to protecting their personal and financial information.
10. Account Security
As cybercriminals become increasingly sophisticated in their methods, it’s critical for organizations to implement strong security measures to safeguard their customers’ accounts and data. Unfortunately, traditional single-factor authentication methods, such as using only a username and password, are no longer sufficient to protect against these threats.
Cyber attackers often use automated bots or other tools to try to guess passwords or use stolen credentials to gain access to user accounts. Once inside, they can carry out a wide range of fraudulent activities, such as stealing sensitive information, making unauthorized purchases, or spreading malware and viruses.
To counter these threats, many organizations are turning to a layered approach to account security that incorporates multi-factor authentication (MFA). MFA involves using two or more distinct authentication factors to verify a user’s identity and grant access to their account. By requiring multiple factors, such as something the user knows (like a password), something they have (like a mobile phone), and something they are (like a fingerprint or facial recognition), MFA makes it much more difficult for attackers to gain unauthorized access.
Behavioural biometrics is one example of a newer form of MFA that looks at patterns in the way users interact with their devices, such as typing speed or mouse movements, to help verify their identity. Device ID, another MFA factor, looks at unique identifiers associated with the user’s device, such as its IP address or hardware specifications, to help confirm their identity.
Biometric authentication, such as facial recognition or fingerprint scanning, is another popular MFA method that is becoming increasingly common in consumer devices like smartphones. By requiring users to provide a physical identifier, biometric authentication can help ensure that only authorized users are granted access to an account.
By implementing a layered approach to account security that includes MFA, organizations can greatly reduce the risk of fraudulent activity and protect their customers’ sensitive information. It’s important for businesses to stay up to date on the latest security technologies and best practices to ensure that they are able to keep pace with the evolving threat landscape and keep their customers safe.