The costly impact of sophisticated scams

Scams are unfortunately only getting more sophisticated. And following a survey recently conducted by Forrester Consulting on behalf of Callsign, Bhavesh Vaghela says that we need to be very concerned.

Scams are commonplace, a part of everyday life. It’s an unpleasant fact to have to accept, and one that’s exacerbated by a second fact: those scams are getting more sophisticated with every passing day.

That’s a big problem and one that has an impact far beyond the immediate financial aspects that go hand in hand with scams. Looking at the results from the study that Callsign commissioned from Forrester, the aspect that stood out for me is the damage that these scams can cause to brands and reputations. Equally clear is the fact that businesses need to act decisively, and quickly.

The survey covered management level and above from 157 different organisations in the banking and financial sector, with the purpose of understanding the impacts of various scams, and the approaches they’re taking in tackling them.

As the research found, there’s no single definition of what constitutes a scam. Scammers constantly change their tactics to exploit new prospects, just as quickly as they abandon attack vectors that have become too tricky to pursue.

Certainly, phishing/vishing/smishing are starting points for many scams (and these factors topped the list for 95% of respondents). But scams are often layered in complexity and incorporate multiple attack vectors, such as remote access takeover (a major concern for 64% of those surveyed), authorised push payment (63%), and other attack vectors such as social engineering and scams focussed on mobile devices.

In terms of the actual impact, 62% of those surveyed lost up to 6% of their revenue due to scams, and 13% lost more than 11%. That adds up to 73% of respondents having lost up to 13% of their revenue. But as alarming as those numbers are, they’re not the only area where scams are hurting businesses.

Forrester’s research highlighted just how much damage the reputational areas of a business can take from consumer-based scams. 75% felt that scams directly affected an organisation’s ability to attract new customers.

Equally, the operational aspects of dealing with scams can be significant. For 78% of respondents, increased fraud attempts resulted in more operational overhead – 45% stated that the impact was significant. Indeed, few aspects of any business are immune to the knock-on effect of dealing with scams, with factors such as fraud loss write-offs and even fines from regulatory noncompliance all causing damage to businesses.

This raises the question of which factors are currently stopping businesses from successfully combatting scams. Forrester found that the limitations of existing technologies undoubtedly play a role – 52% said that technology implementation complexity was a factor.

Equally, 48% of businesses were reluctant to introduce friction into user journeys and thus impede customer experience. Regulatory issues were also evident, as were concerns around privacy.

 All of these are important things to consider. But they have to be weighed up against the cost of getting it wrong – as we’ve seen, failing to defend against scams can carry a heavy price, in financial, operational, and reputational terms. And in the case of the latter, that can also mean losing the hard-to-win digital trust that is fast becoming one of the most valuable assets for any organisation.

So how can businesses get it right? It’s clear that most businesses do have an appetite to address the threats posed by scams, with 32% having spent between USD 250 000 to USD 500,000 on scam prevention solutions. That’s a positive takeaway – as long as those solutions are fit for purpose.

Tackling sophisticated scams means adopting sophisticated solutions. The approaches most commonly adopted by businesses – point solutions or easily compromised, out-of-band authenticators such as SMS OTPs – will not do the trick. You can’t rely on yesterday’s technologies to protect from you tomorrow’s scams.

A better approach is to look to advanced solutions that incorporate technologies such as behavioural biometrics and dynamic fraud warning messages. Indeed, 81% of UK firms cited fraud warning messages such as Callsign’s Dynamic Interventions as the most effective tool to combat fraud, and for good reason.

With so many scammers using social engineering techniques that enable them to coach their potential victims past static warnings, contextual Dynamic Interventions can disrupt a bad actor’s activities by presenting the customer with a tailored message warning them exactly what’s happening. Even if a fraudster is coaching their victim through a business’s user journey, they can’t predict or talk their way around a message that they didn’t anticipate - which means that a potential scam can be stopped dead in its tracks.

Success pays dividends

As I said at the start of this piece, scams are commonplace. And the fact that they’re a serious problem is news to no one. But Forrester’s study reminds us just how serious the matter is, and the penalties that businesses face for failing to act. But there’s a positive side to this. Forward-looking solutions such as Callsign, that incorporate behavioural biometrics, device intelligence, and those vitally important Dynamic Interventions can give businesses (and their customers) the protection that they need.

It’s what customers expect, as businesses well understand: 56% of respondents prioritise customer satisfaction as the main benefit they look for when choosing a solution. Viewed through that lens, I think it’s clear that the organisations that choose the right tools – those that protect their customers without impeding customer experience – will be the ones who successfully serve and retain their customers.

Learn more and download Forrester’s study, How Sophisticated Scams affect Your Customers And Business.

About Bhavesh Vaghela

Bhavesh Vaghela is the VP of Global Product Growth at Callsign. With over 15 years of experience in strategy, product leadership, and digital transformation. He is passionate about creating products that positively impact society with expertise across defence, banking, fintech, and cybersecurity. 

 About Callsign

Callsign makes digital life smoother and safer by helping organisations establish and preserve digital trust so people can get on with their digital lives. The first true representation of identity online, Callsign positively identifies users by their unique characteristics, replicating real-life recognition signals with AI models. The only solution to identify people across every journey, channel, and brand, Callsign makes digital identification seamless and secure, helping drive business growth.