Banking and payment customer experience threatened by upsurge in digital fraud

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Criminals are currently in a wave of global digital crime. From identity theft and bogus account openings to credit card fraud and P2P scams, almost all types of financial crimes are on the rise. Experts say the rapid shift to digital channels since the pandemic has led fraudsters to seek out new vulnerabilities and opportunities.

In this rapidly changing environment, yesterday’s defenses and responses may no longer be sufficient.

Understand the extent of the problem

Data indicates that fraud – the archenemy of the bank – has become worse and more complex since the start of the pandemic due to rapid digitization. Consumers are engaging in online shopping, mobile banking and mobile payments at a much faster rate than they were before the pandemic.

“Digitization has led people to pay in different ways,” Joe Gillespie, founder and chairman of riskCanvas, told The Financial Brand. “You see a lot more payments through apps, payments through text messaging and other means. The scammers have gone after that, and we are seeing new schemes. “

A SAS white paper on digital fraud notes that some of the important problem areas are in digital wallets, P2P payments, merchant QR code payments, and remittances.

Consumers have filed over 2.1 million fraud reports with the FTC in 2020, totaling more than $ 3.3 billion. The strongest growth has been identity theft, where cases nearly doubled between 2019 and 2020 to reach 1.4 million. In many of these attacks, criminals have used stolen identities to apply for government benefits such as pandemic relief or unemployment benefits.

“There was a pretty big grab of money, with just about every type of fraud you can imagine.”

– Joe Gillespie, riskCanvas

Commercial fraud also continues to reach record levels. More than half of the companies experienced fraud over the past 24 months, including customer fraud, cybercrime and accounting fraud, according to a report from PWC. The top three types of fraud identified by the consulting firm were client fraud, cybercrime and accounting fraud.

The flight becomes fast and in real time

Retail bankers need to understand that today’s fraudsters are increasingly sophisticated and are turning to social engineering, technology exploitation and data breaches. Many have now changed their strategy to coordinate and orchestrate attacks that can bypass traditional fraud mitigation strategies.

And in many ways, they have capitalized on the trends and patterns associated with the pandemic. For example, many have taken advantage of the significant shift from in-person to online shopping, leading to an increase in card not present fraud (CNP). According to SAS, fraud rates are 3.1% for CNP transactions, compared to 1.2% for point-of-sale purchases.

Other “hybrid” fraud methods involve “online store pickup” options. Instant payments and enforcement make it easier for criminals to pay with false information and then get in and out with the goods with little risk before red flags arise. “Criminals exploit these instant, real-time payment networks to quickly steal and launder funds,” says Gillespie, “making recovery more difficult and leaving consumers responsible for paying. “

Identity theft, phishing and other forms of social engineering are also used to gain access to merchant accounts and consumer bank accounts. In addition to using banking sites, they also use P2P apps like Zelle, Venmo, and CashApp as a middleman to commit fraud. In many cases, they use fake QR codes, redirects, or other scams to trick users into paying bad accounts.

( Dig deeper: Growing toll of phishing undermines confidence in banks)

The impending problem:

The FCC says criminals have taken advantage of the growing acceptance of P2P applications by Americans since the start of the pandemic.

P2P payment applications often missing the same fraud protections as traditional debit and credit cards. “We’ve seen a lot of fraudulent payments where people are going to socially engineering give up something for a single payment,” says Gillespie.

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Increased protection impacts customer experience

While fraud mitigation has always been a core function in financial services, the increasing digitization of the banking industry has only made it more complex. Banks and credit unions now need to balance fraud prevention and the customer experience by ensuring their security measures don’t hamper a seamless experience. For many institutions, Gillespie observes, this requires the right combination of data analysis, monitoring tools and a risk management strategy.

There are several other things banks can do to prevent data fraud from sabotaging their digital banking CX. This includes giving customers the right tools, making data easily understandable, and working with vendors with high security standards.

( Read more: Balance fraud prevention and customer experience during onboarding)

Understanding the customer lifecycle is a critical part of reducing risk, says Gillespie. By doing due diligence up front and understanding how the customer behaves and behaves in their traditional banking business, they can use AI and machine learning to better identify red flags.

Using two-factor authentication can also add another layer of security beyond simple passwords. “There are easy ways to generate one-time pins if you’ve got everything set up correctly. This can greatly improve safety, ”says Gillespie.

Many financial institutions have been proactive in alerting their customers to the latest scams. An example is Shore of the Blue Valley, who has a page warn customers about undelivered goods, bogus charities, investment scams and social security scams. There are also direct links to the bank’s fraud center and the COVID-19 communication center.

Citizens Bank also been proactive helping consumers identify scams such as spam links, phishing, impersonation calls, fake medicine, vaccines and test kits. It includes a link to a COVID-19 Fraud Prevention Resource Center, which has additional information on things like protecting your data, small business programs, and how to stay safe while working at. residence.

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About Joan Ferguson

Joan Ferguson

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