Major shifts in the cybercrime landscape have had far-reaching effects across multiple industries including financial services. The ongoing challenge is striking a balance between fighting fraud and improving customer experience.
In its 5th Annual Fraud Report, Atlanta-based fraud prevention IDology found businesses in industries including financial services, healthcare, insurance, and ecommerce experiencing more sophisticated fraud attempts across multiple customer-not-present channels. Sixty-seven percent of organizations reported an increase in fraud attempts, compared to just 42% in 2016.
This year's report revealed some notable trends:
- Shifting criminal tactics, along with the complexity of identity verification, as the top challenges to fraud prevention.
- Addressing rising synthetic identity fraud and improving the customer experience by reducing friction found as key areas of strategic interest.
- More than half of companies indicated an increase in mobile-based fraud, led by device cloning.
Major breaches have provided criminals with more identity data to utilize as they regularly change strategies to elude discovery. Criminals also use more sophisticated schemes that are harder to detect, such as synthetic identity fraud, a blend of actual and invented authentication data used to create a new identity. Thirty-one percent of businesses say SIF has increased and 58% were “extremely” or “very” worried about it.
Credit, debit, and prepaid card fraud, along with first-party fraud and account takeover, were the most prevalent forms of fraud. First-party fraud had the most growth, with a 96% increase in prevalence over last year. Half of all fraud attempts had an average transactional value of $1,000 or less.
In addition to deterring changing and sophisticated fraud tactics, respondents also are highly focused on improving the experience for legitimate customers by reducing friction, or the effort required to verify their identities. Forty percent of respondents stated reducing friction was one of the biggest challenges facing companies with respect to identity verification and fraud prevention.
IDology disclosed 2017 brought its fair share of challenges to financial services:
- Sixty percent of financial institutions reported that first-party fraud is a common problem.
- Synthetic identity fraud was more rampant within financial services—50% of financial institutions reported it as prevalent, compared to 38% across all industries.
- Forty-eight percent of financial institutions reported balancing fraud prevention with a frictionless customer experience a challenge to their business.
“The data indicates that fraud is growing in prevalence, type and sophistication and this is changing how businesses approach the identity verification value chain,” John Dancu, CEO of IDology said. “In today's post breach environment, pulling together and assessing identities based on several smart layers of information from different sources, including data on mobile devices, ensures legitimate customers are approved with less friction for a more secure and positive experience.”
Now in its fifth year, IDology's Annual Fraud Report measures fraud trends across a variety of industries in an online survey between September 6, 2017, and October 4, 2017. The survey generated 77 respondents from 58 unique companies. Respondent titles included C-level executives, vice presidents, directors, managers, and analysts in the risk, fraud, compliance, product, and operations departments.
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Roy Urrico
Roy W. Urrico specializes in articles about financial technology and services for Credit Union Times, as well as ghostwriting, copywriting, and case studies. Also: writer/editor of a semi-annual newsletter for Association for Financial Technology since 1997 and history projects funded by the U.S Interior Department, National Park Service and Warren County (N.Y.).
