Trends and Takeaways for Mitigating Fraud in 2022
By Allied Solutions | January 17, 2022
Trends and Takeaways for Mitigating Fraud in 2022
Given the current economic and pandemic state, unfortunately, financial fraud will continue to thrive well into 2022 and beyond with fraudsters anticipated to exploit consumers across all digital channels.
As financial institutions and consumers strengthen their efforts to fight back, it can be expected that there will be a slew of increased legislation and regulatory oversight and repercussions for offenders. Unfortunately, regulations and large fines may not be enough to combat the fraudster’s ambitious efforts; businesses must take matters into their own hands and update their fraud monitoring and prevention proficiencies to protect both themselves and their customers.
There have been a variety of scams circling the waters of 2021, among them included:
1. Phishing Scams
2. Fake Government Agency Scams
3. Other Phone Scams
4. Tech Support Scams
5. Fake Online Stores
The impacts of these scams go beyond financial loss; they are insurmountable and often recurrent. Among those impacts is the loss of trust. Fraud undermines financial institution’s ability to deliver their services with any amount of security. When a scam features the name, logo or identifying trademarks of an established financial institution, that institution may undergo subsequent consumer and financial attrition.
Fraud Trends that shaped 2021:
Account Takeover (ATO)
ATO fraud attacks, such as credential stuffing, increased in 2021. Commonly, ATO is when an unauthorized user acquires a consumer’s online account to facilitate fraud and financial crimes.
Mobile Consumer Fraud
Mobile banking and the integration of instant payment apps, such as Venmo and Zelle, have answered growing consumer demands for convenient digital banking services. While mobile banking presents opportunities to improve customer engagement and deliver digital-first experiences, it has also opened the gates to more financial crime and fraud and introduced new challenges in fraud management.
Data that has been compromised from countless breaches includes broader sets of personally identifiable information (PII), as well as partial information, like birth dates and addresses. This sensitive data is then used by fraudsters and financial criminals to fuel assorted schemes and attacks, such as committing application fraud via synthetic identities, for example. Data breaches are becoming more prevalent and costly. These costs are both direct, such as forensic experts, and indirect, such as reputational damage.
Dark Web Activity
The data attained in financial data breaches are widely commoditized on the dark web, which has resulted in a normalization of compromised PII and by extension, an influx of intricate fraud activity. The quantity of data and activity available throughout the dark web has momentously grown recently, powered by the growth of data breaches, increasingly advanced cybercrime tools, and the commonplace adoption of digital banking and online activity.
Consulting the Crystal Ball
Financial institutions are inherently vulnerable to fraud and scams, which is why being able to detect criminal activity is paramount. As digital banking apps and online shopping continues to grow, so must the efforts to detect and prevent fraud. Machine learning is being used as a solution to detect transaction fraud before it occurs. This not only serves to protect customers from fraudulent effects but also reduces or eliminates friction for customers by reducing the frequency of mistakenly flagged transactions.
The last two years have set the pace for digital advances as financial institutions rushed to advance and sustain their digital-first strategies. But at what cost? Deploying digital advances amidst market, social and economic disruption, will exacerbate these trends in 2022. Bad actors and career criminals will still be exploiting the data that was purchased on the dark web over the course of the past year. The typical gestation period can take upwards of a year from the time of purchase to using the illegally obtained data.
The ever-connected consumer pool will only continue to contribute to the growth of consumer scams. This issue will only be heightened by the technical proficiency of cybercriminals who consistently improve their techniques and approaches alongside developing tools and technologies, changing consumer behaviors, and industry disruption.
Fraud Prevention Tactics for 2022
With many lessons learned over the past 24 months, it’s time to change the status quo. Being reactionary is a thing of the past, looking forward, financial institutions need be adoptive to progressive strategic planning.
Minimizing identify theft and recognizing the threat of fraudulent transactions requires advanced algorithms and artificial intelligence. These digital tools recognize malicious and suspicious activity that trained employees may not detect. Automated machine learning, biometrics, spoof-proof caller ID, document authentication all can deliver near instant digital identity verification with outstanding results and minimum friction for customers and the financial institution.
Authentication measures can also aide in safeguarding against fraud. These measures should be both strong and reviewed frequently to limit fraudsters’ access to accounts. Another fraud prevention measure is enhanced consumer communication. This can help your consumers build trust with your brand and stay educated on prevalent, circulating scams.
Staying abreast of industry fraud trends, and subsequently training staff on such trends is one of the best defenses for mitigating fraud. Businesses and institutions should also consider removal of the traditional password as a means of security and identification. The right technology is available to harness, it’s just a case of adopting it.
2022 will be a noteworthy year for financial organizations, presenting new obstacles in the transformation of fraud prevention and digital augmentation initiatives. The risk landscape will grow more complicated, automated, and diversified, and organizations must remain cautious to guard against and stay ahead of the projected threats as the new year plays out.
Learning from past experiences is a key strategy in advancing, but practical application is what drives evolution.
About Allied Solutions
Allied Solutions, LLC is one of the largest providers of insurance, lending, and marketing products to financial institutions in the US. Allied Solutions uses technology-based products and services customized to meet the needs of over 4,000 banks and credit unions, along with a portfolio of innovative products and services from a wide variety of providers. Allied Solutions maintains over 10 regional offices and service centers around the country and is a subsidiary of Securian Financial Group, Inc.