Financial institutions experience fraud losses worth billions every year. We are staring down a bleak future with a projected 25% increase in global fraud costs in 2027 over 2020, worth $40.62 billion. According to the Federal Trade Commission, consumers reported losing more than $5.8 billion to fraud in 2021, which was nearly $2.5 billion more than the previous year.
Black Friday and Cyber Monday open the floodgates for fraudsters, and financial institutions aggressively prepare for the increased risk of fraud attacks and consumer concerns regarding credit security.
Check the following actions against your existing plans to see if there are any extra steps you can take to prepare for the onslaught of potential fraud losses.
Knowledge is power and understanding subtle changes in portfolio volumes can have tremendous impacts should an attack occur. Pay close attention to things like application volume, demographics and credit scores prior to the holiday season and current time.
Using your baseline information, scan the acquisition channels for changes in patterns and volumes. Shifts in application volumes, credit quality and demographic information could indicate potential attacks that are coming. So you’ll be able to recognize and mitigate issues faster.
Consumers are shaken by reports of large data breaches or increased fraud activity, which can cause them to close existing accounts or reduce their desire to apply for new credit. Customer service agents should be equipped with the right information and the language to assuage those fears. Understanding and being an advocate for the customer can cement long-term relationships. Increased staffing will likely be needed in the short term to handle the increased volumes.
PII (Personal Identifiable Information) data breaches typically drive increases in both fraud application and account takeover. Therefore, authenticating customers is key. Also, a 2022 Breach Report shared an increase of 35% in 2021 from 2020 of attacks involving usernames and passwords – representing over 2 billion compromised records. Attacks of this magnitude can diminish the effectiveness of Knowledge Based Authentication (KBA) tools. Do an industry scan to identify tools that have shown improved performance for authentication such as One Time Password (OTP).
The frequency of fraud attacks and large data breaches means that we will see tighter regulatory scrutiny in application and account maintenance processes. Additionally, credit bureau disputes are increasing. Assess your current processes to make sure they are well understood, documented and controlled. This action will help you prepare for inevitable regulatory reviews and changes that will likely occur.
As you know, there are many ways for fraudsters to infiltrate your customer’s accounts, or worse – inflict a data breach of a greater magnitude. But if you keep our five steps in mind and work through them on a regular basis you stand a greater chance to protect consumers and your business.
As a response to each new fraud attack and layering of technology, many organizations have multiple layers of legacy systems that are not scaleable or easy to update. These systems need to be addressed.
Here’s information on implementing your fraud tech health check.