As consumers are spending more and more online, the nature of fraud is changing and the level of ingenuity fraudsters are now deploying demands a new, collaborative approach from both individuals and businesses to address the threat.
Here at TransUnion, our 2018 annual report, Building a Fraud Fortress revealed that over half (59%) of businesses predict a serious fraud incident or security breach within the next year if they continue with their current technology, processes and tools. 17% also revealed that they have already experienced such an incident.
According to fraud prevention service Cifas, identity fraud represents over half of all fraud recorded, with 87% perpetrated online. In most of these cases, identity fraud involves fraudsters buying a product or opening an account in the name of the innocent victim. Often, the victim may not even realise this has occurred until they come across issues with their credit rating resulting from the theft.
Whilst the latest Cifas figures show that identity fraud has fallen for the first time since 2014, with its members recording 84,463 cases in the first six months of the year, a 5% drop compared to the same period in 2017, it remains, in the words of Cifas, “uncomfortably high”.
The Cifas figures pointed out that whilst the overall numbers saw a slight decrease - perhaps thanks in part to greater awareness as a result of widespread campaigns to reduce fraud - there has, however, been a sharp rise in specific fraud sub categories. For example, identity fraudsters applying for plastic card accounts, with cases increasing by 12% and identity fraud against online retail accounts rising by 24%. Although businesses are constantly streamlining their processes, this data shows that fraudsters are adapting quickly to these changes.
Criminals are also increasingly preying on younger people, often through social media. The younger cohort are more likely to have social media accounts than older victims, while the latter are more likely to have had their details leaked multiple times via a data breach.
According to Cifas, if we consider the picture looking over the last decade, there has been a 125% increase in identity fraud since 2007, and as people increasingly move online, criminals are likely to continue to use the web to buy and sell personal data. Analysis by the fraud prevention service found that fraudsters can buy bank details for as little as £161 and passport information for just £40, allowing them to open fake accounts and take out loans, mobile phone contracts and credit cards, by accessing credit in the victim’s name.
Looking to the future the human element
For the fraud fightback to be successful, investment is essential. Businesses really need to back their fraud managers and help them to get smarter with both their human and technological resources and in their response to fraud.
Building a fraud fortress - a combination of fraud prevention technologies and staff education that makes an organisation more resilient to fraud - is essential. It encapsulates the best ID verification and intelligence-based systems to stop fraud, and twins them with a programme to help all stakeholders within a business to understand how to recognise when it might be taking place. It’s important to adapt and evolve training to keep up with the fraudsters – it can’t simply be a tick-box exercise. Live exercises and employee drills are a good idea as it’s important to simulate realistic situations.
Currently, just 26% of businesses provide ongoing training on fraud, according to our research. Yet 60% find it to be an effective measure. Employees at every level are being targeted by fraudsters and everyone needs to know about what fraud looks like, and what their businesses are doing to protect them. But education is only one piece of the puzzle and businesses should be thinking about the other tools available that can be used to help better protect themselves against fraud.
The tech element
The primary element to an effective fraud fortress is technology. Artificial intelligence (AI), machine learning and biometrics all have a part to play. And 59% of businesses, according to our research, are set to increase expenditure on the latter, boosting their fraud prevention mechanisms with it.
Fraud is a human problem but the fightback to it must be designed to help humans out with intelligent, future-ready solutions. With better frontline protection through robust ID verification and fraud prevention technology, employees and customers will be better protected by default, meaning that education becomes the supplementary protection, not the primary form of defence.
One of the primary technologies that will perform a major role in fraud prevention going forward is implementing ID verification. Fraud professionals understand that they need to get the basics on fraud prevention right as they battle changing and complex threats. And that it’s only by having these core technological foundations in place that they’ll be able to battle fraud and fraudsters.
The importance of collaboration
Whilst much is being done, both through technology and education, the fraud problem is far from being solved. Collaboration is essential. Businesses need to share insights and best practice if they want to stay a step ahead. Ongoing fraud has had a damaging impact on trust in businesses and it is crucial that they work to win back consumer confidence. This demands a broad understanding of the tools and the available advanced technologies to ensure the safekeeping of business and customer data. And for both businesses and individuals, education on the risks and how to avoid them is important. The optimal fraud prevention strategy is a multi-layered approach that can be adapted to specific products and channels.
Fraud may be a human problem, but without the right technology, we leave our people incredibly vulnerable.
Sarah Golding, Head of Fraud Consultancy and Sales Support at TransUnion (formerly Callcredit)
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