Fighting fraud in the era of COVID-19
Fraud prevention and mitigation remain an ever-present and evolving challenge for financial services leaders. Fraudsters continue to engineer schemes which threaten the customer experience and pose risk to a financial services organization’s bottom-line.
While most financial services organizations work to help customers meet the economic challenges of COVID-19, criminals see the pandemic as a time to accelerate their behavior. However, financial services leaders are ready to fight and safeguard their customers and organizations. Today, these leaders continue to proactively arm against fraudsters to maintain safe and stable financial services organizations.
The COVID fraud landscape
Every financial services leader faces challenges when it comes to fraud. The techniques, tools and strategies criminals use to perpetrate fraud are constantly changing, and massive changes in consumer behavior, such as those presented by COVID-19, provide new openings to take advantage of potential gaps in detection and prevention procedures. With most consumers trying to minimize the amount of in-person business they conduct, criminals have ramped up efforts to fraudulently open new accounts online using stolen credentials.
According to recent BAI research, most financial services leaders reported they have seen, or expect to see, at least a minor increase in fraudulent activity because of COVID-19. The majority of financial services organizations surveyed saw an increase in third-party fraud, or crimes committed by using another person’s identity or personal details to open or takeover an account.
The most reported form of third-party fraud centered on opportunities around the federal consumer stimulus check or economic relief scams. The IRS reported that one of the most common forms of fraud involve criminals convincing people to “refund” part of an accidental overpayment or phishing for bank account or Social Security information to fraudulently file for a victim’s stimulus check. With a significant increase in online commerce from the pandemic, criminals also seize an opportunity to take advantage of card-not-present fraud.
Additionally, financial services leaders have seen an increase in instances of first-party fraud, which typically involves an individual using their own identity to obtain a loan with no intention of paying.
Fraud security during COVID-19
As criminals continually evolve their methods, financial services leaders continue to seek and adopt new fraud prevention policies, procedures and technology to protect their organizations and their customers. This helps ensure financial services leaders are a step ahead in preparing for new and different fraud arising from changes caused by the pandemic.
However, financial services organizations cannot do it alone. The key to successful fraud mitigation is a combined approach where fraudsters are being blocked from all sides. It is critically important that financial services leaders help customers understand the fraud landscape so they can protect themselves by keeping personal data security top-of-mind.
According to BAI Banking Outlook research, 86 percent of consumers agree they have been much more careful about sharing their personal information over the past two years. This cohesive approach to data protection only strengthens the processes and procedures put in place by the organization.
Considerations as the pandemic continues
As the pandemic continues and fraudsters adapt their schemes, financial services leaders need to stay diligent to prevent attacks on their customers and organizations. According to our research, financial services leaders are focused on staying ahead of fraud occurrences by utilizing customer communications, revising employee policies and procedures, and implementing additional employee training to better educate, prepare and fight this crime.
Financial services leaders are also exploring new areas to verify and authenticate customer identities. Artificial intelligence and big data lead the conversations regarding resources for better authentication to ward off fraud. The good news is that, according to BAI Banking Outlook research, 53 percent of consumers agree it is okay for their primary financial services provider to use artificial intelligence (AI) to understand and improve their digital customer experience.
Leaders are also signaling the use of biometrics to safeguard the customer and organization more effectively against the growing number of fraud instances. Biometrics focus on personal features such as retina scans, fingerprints and other elements that are unique to the individual. According to the same BAI research, 60 percent of financial services customers would feel more secure if financial services organizations used fingerprints, retina scans and/or speech patterns to identify them.
Through the pandemic and beyond, fraudsters will continue to evolve and latch on to opportunities to cause disruption. The most effective approach will be a unified effort by customers and their financial services organizations. Staying a step ahead to minimize risk with communication and technology is critical. As the adage says, the best defense is a strong offense. Working together, financial services organizations and their customers will win, and fraudsters will lose.