Suspected financial services digital fraud attempts rise by 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. The conclusions are based on intelligence from billions of transactions and more than 40,000 websites and apps contained in its TruValidate identity proofing, risk-based authentication and fraud analytics solution suite.

“Incidents of attempted fraud are on the rise internationally, with financial services seeing a particularly dramatic jump,” explained John Cannon, managing director of fraud and ID at TransUnion in the UK. “Fraudsters have been quick to target a sector which has seen online transactions surge over the last year due to the pandemic.”

Cannon continued: “Financial services organisations are implementing fraud prevention solutions with an encouraging degree of success. Our recent survey of UK consumers found that more than one-in-ten (ie 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 witnessed across the last year, businesses must ensure they’re continually reviewing and updating their fraud prevention strategies to help them deliver secure and seamless customer journeys.”

Acceleration to digital

COVID-19 has accelerated the move towards digital financial transactions, with High Street banks reporting a huge increase. This is unsurprising in light of repeated lockdowns and social distancing. That 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’ve changed their current account since March 2020 opting for an online-only provider. 

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

TransUnion defines true identity theft, the top type of digital fraud in financial services, as the consumer using a stolen identity to commit fraud with the victim being a real person. The second and third most reported type of digital fraud by TransUnion financial services customers are, respectively, first party application fraud and account takeover.

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

Agility of fraudsters

Sam Welch, director of banking at TransUnion in the UK, commented: “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 that they keep up with the ever-evolving tactics used by fraudsters to obtain and misuse customer and company information.”

Welch concluded: “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.”