Fraud continues to be a significant challenge for the financial services industry. As organizations within the sector expand the number of channels within which they operate, they must keep one step ahead of criminals looking to take advantage of any weak links.
New studies have highlighted the challenges that financial institutions (FIs) continue to face when combating fraudulent behavior. Statistics from Synergistics showed 53 per cent of internet households that responded to an online poll reported they had previously suffered identity theft or fraud.
This figure was notably higher than the 44 per cent that reported the same in 2014, and 21 percentage points more than 2006 levels. The organization claimed fraud has risen 71 per cent over the last decade.
“Our data confirms that ID theft and fraud is on the rise and consumers are justifiably concerned,” said Genie M Driskill, chief operating officer at Synergistics. “This only serves to underscore the urgency for providers in addressing this ongoing assault on consumers’ financial lives.”
Which types of fraud are most prevalent?
According to Synergistics, card-not-present (CNP) fraud was particularly common among respondents.
Approximately 30 per cent of households had experienced criminals using their credit or debit cards for unauthorized purchases over the telephone or online. Overall, around one-fifth of people said their card details had previously been illegally obtained and used to buy goods and services.
Recent LexisNexis data revealed issuers lose nearly $11 billion to card fraud each year, with credit cards responsible for 71 per cent of the total.
LexisNexis’s latest Card Issuer Fraud Study claimed many FIs believe the increasing adoption of EMV chip cards and reader technologies will result in a shift towards more CNP fraud, although point-of-sale fraud is likely to decline.
The research also showed that issuers in the US expect there to be a rush towards counterfeit card fraud in the immediate future, as criminals hope to take advantage of the remaining opportunities in magnetic-stripe cards before they dwindle.
What can FIs do to prevent fraud?
There are various options open to FIs hoping to strengthen their fraud prevention measures. A comprehensive omnichannel approach is critical, but organizations must ensure the solutions they implement don’t hamper customer experience and convenience.
LexisNexis advised US issuers to invest in systems that prepare for the new challenges the EMV rollout will create, such as increases in application fraud. Recent Javelin Research figures supported this theory, with new account fraud increasing 113 per cent last year.
Improving identity authentication processes through biometrics and other verification techniques is a recommended measure for businesses, as well as increased communication with affiliates to identity potential threats.
“Staying ahead of fraudsters and hackers is the ongoing challenge for providers who need to communicate and demonstrate the depth of their commitment to protecting their customers’ financial information,” Mr Driskill stated.
FIs appear to be getting the message, with LexisNexis stating that 78 per cent of issuers intend to invest significantly in fraud mitigation solutions over the next 12 months. Those that don’t could find themselves struggling to tackle a new wave of sophisticated cybercriminals.