Cybercrime
Fintech

Increase in Digital Banking Facilitating Equal Rise in Financial Fraud Attempts

As more consumers turn to online to satisfy their banking and financial demands, recently released research from the insights company TransUnion has uncovered how scam artists are ramping up their efforts in the financial services industry.

When comparing figures recorded between September 1st to December 31st 2020, and January 1st to May 1st 2021, the figures represented how the percentage of suspected digital fraud attempts within the financial sector increased by an alarming 149%.

Across industries, the rate of suspected digital fraud attempts globally rose 24% when comparing the first four months of 2021 with the last four months of 2020.

TransUnion monitors digital fraud attempts reported by businesses in varied industries such as gambling, gaming, financial services, healthcare, insurance, retail, and telecommunications, among others. The conclusions are based on intelligence from billions of transactions and more than 40,000 websites and apps contained in its identity proofing, risk-based authentication, and fraud analytics solution suite – TransUnion TruValidate™.

John Cannon, Managing Director of Fraud and ID, TransUnion
John Cannon, Managing Director of Fraud and ID, TransUnion

“Incidents of attempted fraud are on the rise internationally, with financial services seeing a particularly dramatic jump. Fraudsters have been quick to target a sector which has seen online transactions surge over the last year due to the pandemic,” comments John Cannon, Managing Director of fraud and ID at TransUnion in the UK. “Financial services organisations are, however, implementing fraud prevention solutions with an encouraging degree of success and our recent survey of UK consumers found more than one in 10 (12%) had been protected by their bank from losing money after falling victim to a scam, but this global research emphasises the huge scale of the task. As we continue to recover from the uncertainty seen over the last year, businesses must ensure they are continually reviewing and updating their fraud prevention strategies to help them deliver secure and seamless customer journeys.”

Covid-19 has facilitated and accelerated an attitude towards digital financial transactions, with high street banks reporting a huge increase in online user activity; which is unsurprising in light of repeated lockdowns and social distancing. This shift in behaviour has also led to growth for online-only banks and apps with nearly a third (32%) of consumers in the UK who have changed their current account since March 2020 opting for an online-only provider.

However, despite this growth in digital-first finance, concerns over security remain a major deterrent to consumers in the UK, with 35% of those who would not consider an online-only bank or app saying it was due to fears over digital fraud.

Examining Fraud Types and Their Impact on Industries

TransUnion analysed industries with the highest increases and declines in the percent of suspected digital fraud attempts against them, comparing the periods of 1st September to 31st December 2020 and 1st January to 1st May 2021.

Top Suspected Digital Fraud Rate Attempt Increases and Declines by Industry

IndustrySuspected Fraud Percentage ChangeTop Type of Fraud
Largest Percentage Increases
Financial Services149.44%True Identity Theft
Travel and Leisure25.03%Credit Card Fraud
Gaming9.24%Gold Farming
Largest Percentage Declines
Logistics-32.74%Shipping Fraud
Insurance-16.35%Suspected Ghost Broker
Retail-8.33%Promotion Abuse

In terms of true identity theft – the top type of digital fraud in financial services – Transwise identifies this as when the consumer steals a valid identity to commit financial fraud. The second and third most reported types of digital fraud were first-party application fraud and account takeover, respectively.

First-party application fraud is when a consumer refuses to repay legitimately incurred debts and/or falsely claims to be a victim of identity fraud to evade debt. Account takeover is when someone other than the owner of an account uses the account without permission, indicating that the account has been maliciously compromised.

Sam Welch, Director of Banking at TransUnion in the UK, comments, “What we’re seeing demonstrated on an international scale is the agility used by fraudsters to target industries which are registering a boom in transactional activity. For finance providers in the UK, it’s critical to keep up with the ever-evolving tactics used by fraudsters to obtain and misuse customer and company information. An adaptable fraud prevention strategy with a multi-layered approach is crucial to managing these threats, which show no signs of abating in the near future.”

Author

  • Tyler is a Fintech Junior Journalist with specific interests in Online Banking and emerging AI technologies. He began his career writing with a plethora of national and international publications.

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