Feedzai, the RiskOps platform for financial risk management, has released its quarterly Financial Crime Report, The RiskOps Age, based on an analysis of over 18 billion global banking transactions throughout 2021.
The report identifies trends in consumer spending and fraud attacks and compares transactional intelligence from 2021 with the previous three years to provide insights from the pre-pandemic era vs. the first and second years of the pandemic. One of the main conclusions is that while online transactions grew 65 per cent, online fraud attack rates grew by 233 per cent.
“The shift from in-person transactions to online transactions, along with the plethora of devices and accounts each person has, creates vast amounts of data points. From a fraudster’s point of view, this is the best case scenario. It’s easier for them to hide in all that noise,” said Jaime Ferreira, VP of global data science at Feedzai. “But it also creates opportunities for banks to create more effective and personal products and services. It’s for both of the reasons that we’ve called this report The RiskOps Age. Now is the time to connect teams and data to prevent fraud and provide elevated customer experiences.”
The data shows that consumers shifted to digital entertainment platforms during the pandemic, and so did fraudsters. Criminals often like to hide in plain sight, and the sheer number of transactions for digital entertainment combined with the low dollar amount per transaction provides fraudsters with an ideal environment to test stolen cards along with other scams. Feedzai’s Financial Crime Report saw a 794% increase in fraud attacks on digital entertainment transactions in 2021 vs. 2019.
“Living the digital lifestyle adds a world of convenience, but also provides a low-risk, high-reward environment for fraudsters,” adds Ferreira. “It’s the perfect place for fraudsters to hide – in a massive number of low-dollar amount transactions. The more transactions, the more opportunities for them to test stolen cards or other scams. Consumers and banks need to watch out for those small fraud transactions before they add up to big bills.”
Top Fraud Scams
With fraud on the rise, the report also identified the top five fraud scams, with account takeover (ATO) and social engineering attacks ranking as fraudsters’ current favourite schemes. The top scam on the list has risen from fourth to first place since last year. ATO is a form of identity theft where fraudsters change account information, including passwords, and ‘take over’ the account.
Top 5 fraud attacks:
- Account Takeover
- Social Engineering Scams
- Purchase Scams
- Impersonation Scams
- Smishing Scams
Fraud in other parts of the world
- The United Kingdom of Fraud:
In the UK, banking fraud attacks are 50 per cent more common when British consumers banked via desktops and laptops, telephone, or in-person combined vs through a mobile banking application.
For mobile devices, fraudsters attempted 30 per cent higher pound (£) amounts of fraud on Android devices, but fraud rates were 67 per cent higher on iOS devices.
- The United States of Fraud:
In its previous Financial Crime Report, Feedzai focused on the trend away from cash. However, cash didn’t bounce back even when many pandemic-related restrictions were lifted. In fact, a steeper decline was seen in US cash withdrawals comparing 2021 to 2020 vs. 2019 to 2020. Overall, US cash withdrawals decreased 75 per cent from pre-pandemic levels to today.
And for those who are thinking about a vacation in the United States, the report further ranked the top six US tourist cities by fraud rate with Miami, Los Angeles, and San Francisco taking first, second, and third spots respectively. After a gradual climb from the number three ranking in 2019 and number two in 2020, Miami overtakes San Francisco as the tourist city with the highest fraud rate, up 511 per cent. San Francisco drops to number three with a 42 per cent decrease in fraud rate.
In fourth place is New York City with a 160 per cent increase over last year, followed by Orlando (+15 per cent) and Las Vegas (+334 per cent).
How consumers can prevent social engineering attacks
- Remember, the click is a trick: Don’t open or click on suspicious links via email or text. Fraudsters can’t trick you if you don’t click on their links.
- Update devices: Install and regularly update anti-malware software. When your computer or phone prompts you to install updates, do it.
- Protect your privacy: Don’t provide personal information about yourself or your employer unless you are 100 per cent sure the person you’re interacting with should have access to that information.
- Use multi-factor authentication: Do not reveal personal or financial information in an email, and do not respond to email solicitations for this information. This includes clicking on links sent via email.
- Don’t believe the hype: If an offer, prize, or opportunity is too good to be true, it isn’t true. Don’t fall for tempting out-of-this-world offers.
