Voice of the Industry

The new era of fraud – how to mitigate fraud risk during challenging times

Friday 21 May 2021 09:23 CET | Editor: Stefana Ivan | Voice of the industry

Maxim Kuzin, Head of Fraud Prevention and Risk as a Service at Radar Payments, provides a take on the current trends followed by fraudsters in order to commit financial crimes all over the world

As consumers constantly turn to ecommerce due to the COVID-19 global pandemic, the amount of fraud in the ecosystem is also increasing. According to Nilson Report, by 2025, the total payment card volume worldwide is projected to be USD 56.182 trillion, with gross card fraud globally expected to be USD 35.31 billion. An anonymised statistics of events detected by Kaspersky Fraud Prevention revealed that from January to December 2020, the share of account takeover frauds increased from 34% in 2019 to 54% in 2020. 

In addition to the newer techniques of committing fraud, classic models such as social engineering and fraudulent activities through digital banking platforms have surged. Fraudsters are steering crimes by using human stress and vulnerability to rob them. Consequently, the fraudsters’ behaviour has also shifted. For instance, although the older generation was the main target for fraudulent activities before the pandemic, fraud among younger generations has increased by four times recently.

Why fraudsters prefer the online space

Furthermore, although the rapid growth in digital banking brings us one step closer to a cashless economy, it also opens the doors for fraudsters. As they figure out a bank’s weakness, they repeatedly exploit the same area to achieve their goals. Besides, due to the numerous fraud possibilities presented by online banking, fraudsters can pull off more crimes in less time. Fraudsters can steal personal information that is present on online banking or ecommerce platforms and use it multiple times before banks can put a stop to it. Additionally, as online banking reduces human interaction, the process of finding the actual criminal gets even more challenging.

Two widespread types of fraud: social engineering and friendly fraud

Social engineering attacks are the ones where fraudsters usually impersonate trusted individuals. A widely known incident is where a fraudster pretends to be a bank representative and asks his victims for personal details such as their PIN. This type of fraud occurs most often over phone calls, through malicious links on emails, or WhatsApp.

Furthermore, friendly fraud occurs when a consumer makes an online shopping purchase with their credit card and then requests a chargeback from the issuing bank after receiving the purchased goods or services. This type of fraud can also occur when a friend or relative of the victim makes purchases with his credit card without his consent.

Can social engineering and friendly fraud be prevented?

Even though the losses caused by social engineering and friendly fraud impact businesses more and more, companies can take the following steps to prevent them: 

Preventing: Businesses can mitigate risks during onboarding checks and customer profiling of transaction activities. Besides, the e-KYC process can deploy external and internal data that is made available within the organisation.

Identifying: Financial institutions can identify risk and suspicious activities in real time using linking transactions and events from different channels and touchpoints. Moreover, applying omnichannel analytics, using behavioural profiling and historical data can also help identify the nature of a transaction.

Stopping: After the risk has been identified and the fraud has been detected, acting immediately is essential. The process includes approving unsuspicious transactions – or, on the contrary, challenging customers and declining high-risk transactions. 

Combining: A fraud management solution should comprise multiple layers for a safe flow of transactions, including e-KYC and risk scoring during onboarding, customer profiling, adjusting models on regular customer activities, and equipping analysts with enhanced information and sufficient decision-making authorities. 

Let technology and data do the job

Consequently, fraudsters will continue to target financial institutions as they look for ways to get a quick gain, while customers will keep losing trust in their banks – if the process remains unchanged. Banks and other financial institutions need to embrace fraud management solutions that come from technology experts who fully understand the lifecycle of fraudsters and their ‘modus operandi’. After all, at the end of the day, a financial institution is most successful in its operations when it provides its users with a safe and painless banking journey. Therefore, to understand the details of today’s fraudster, download our guide here.

About Maxim Kuzin

Maxim Kuzin is a pioneering member at BPC Banking Technologies with over 18 years of experience in Risk and Fraud Prevention Strategies. Maxim contributes to all research and development that is required to develop and constantly maintain SmartVista’s fraud prevention solution. He is a regular speaker and teacher, and has produced the foundation course for banking card technologies in universities for senior students who enrolled for Banking Systems and Information Technology. From designing the architecture to implementing solutions for customer support for various regions such as Europe, Africa, Asia and Middle East, Maxim’s involvement has taken Fraud Management at BPC to a leading position in the space.

About Radar Payments

Radar Payments is a leading innovative payment processing provider dedicated to financial institutions, including payment service providers (PSPs), banks, acquirers, issuers, and fintechs. It offers advisory services and a one-stop platform for end-to-end omnichannel processing, enabling the acceptance of most of the widely adopted payment methods, delivered on a PaaS, SaaS, or fully managed service model. Built using BPC’s SmartVista, the Radar Payments platform delivers scalability, resilience, performance, and unparalleled security.

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Keywords: Radar Payments, fraud prevention, friendly fraud, social engineering, account takeover
Categories: Fraud & Financial Crime
Countries: World
This article is part of category

Fraud & Financial Crime