Shattered Trust: The Cost of Digital Fraud in 2024

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With our digital world expanding rapidly, fraudsters have a vast playground to exploit, with the tools to commit fraud readily accessible. Although anti-fraud experts are using cutting-edge technology, criminals have the advantage of launching massive attacks without the need to play by any rules. It's a relentless battle, but awareness and industry collaboration for fraud prevention are our strongest weapons.

 

An urgent need to meet evolving fraud risks, faster

A look at the past five years shows an ominous trend.

From 2019 to 2023, there was a:

  • 90% growth in digital transactions
  • 105% growth in digital fraud
  • 17% increase in fraud compared to online trade

From 2022 to 2023 there was a:

  • 6% growth in digital transactions
  • 14% growth in digital fraud
  • 105% increase in the volume of suspected digital fraud

 

2019 to 2023 – the dawn of a new era in fraud

The past five years, marked by the COVID-19 pandemic and the rise of AI, have dramatically reshaped the online landscape. This period has witnessed a surge in digital transactions, which have become a prime target for fraudsters.

Before 2019, the online world was relatively stable. However, the pandemic accelerated the adoption of digital technologies, leading to a significant increase in both the volume and complexity of online transactions.

AI and related technologies have become a cornerstone of the battle between legitimate businesses and fraudsters. Those seeking to protect their interests have invested heavily in AI-driven cyber fraud risk mitigation solutions, while criminals have also adopted the same technologies to enhance their capabilities. This ongoing arms race has intensified the challenges faced by online businesses.

 

Know your enemy: the five most common kinds of online fraud

Fraudsters are constantly evolving their tactics and always trying new things. While there are many types of online fraud, five categories account for over a third of all cases:

  1. Account takeover: Fraudsters gain control of accounts using stolen credentials, social engineering, or other methods.
  2. Credit card fraud: Misuse of credit or debit card information.
  3. True identity theft: Using stolen personal information to commit various crimes.
  4.  Automated Clearing House (ACH)/debit fraud: Unauthorised transfers of funds from bank accounts.
  5. Synthetic identity fraud: Creating fake identities using real and fabricated information.

These fraudulent actions often serve as a gateway to other forms of criminal activities, reflecting the interconnected nature of online crime.

 

Know Your Customer (KYC) and digital onboarding: a double-edged sword

Digital onboarding, while designed to streamline the verification process, has become a battleground between legitimate businesses and fraudsters, with genuine customers caught in the crossfire. While it offers efficiency and convenience, it also presents new vulnerabilities.

Emerging fraud risks - the rise of deepfakes

Deepfakes, once a novelty, have become a serious threat to digital onboarding. Their prevalence has surged, with costs plummeting from $300-$20,000 per minute in 2023 to $100 per minute due to subscription-based offerings. This accessibility has empowered fraudsters to launch sophisticated attacks at scale.

Key statistics:

Beyond deepfakes: rethinking identity in digital fraud strategies

To combat these threats, financial institutions must look beyond deepfakes and focus on the four pillars of identity:

  1. Person: Is the individual who they claim to be? Are their provided details consistent with their claimed identity? Are there any signs of compromised personal information or suspicious device activity? Is a ‘selfie’ required to be taken by the client linked to another identity or social security number?
  2. Accounts: How many accounts does the customer have? Which institutions are these accounts connected to? What is their credit activity history? Have any accounts been flagged for suspicious activity? Has the customer opened several similar accounts within a short span of time?
  3. Transactions: Do the customer's behaviours align with expected good customer behaviour or unpredictable patterns associated with fraudulent behaviour? Are there any unusual patterns or high-risk activities? Have any accounts, identity or device been blocked by other parties?
  4. Devices: What devices are being used to access the customer's accounts? Have any of these devices been linked to fraud previously? Are there any signs of device tampering or the use of VPNs or proxies to mask their location?

The holistic approach to identity in fraud risk management

Businesses must move from a siloed approach to identity, to a more holistic approach.  These four pillars should be considered in conjunction with each other, so businesses can gain a more thorough understanding of a customer's authenticity and identify potential red flags. This approach is essential in the ongoing battle against fraud.

 

Financial services under siege: the rising threat of fraud and money laundering

The financial services industry is under relentless attack by fraudsters and money launderers. With annual money laundering volumes ranging from 2% to 5% of global GDP, it’s critical for businesses to learn how to protect themselves and stay compliant with anti-money laundering and fraud regulations.

All-in on fraud prevention - adapting to evolving fraud risks in online gaming

With $1.2 billion in fraud losses for mobile casinos and betting platforms worldwide between 2022 and 2023 alone, the gaming industry is facing a crisis. As fraud rates skyrocket by 64% from 2022 to 2024, gaming companies must be proactive in identifying and combating emerging fraud risks to protect their operations and customers.

With more cell phones on the planet than people, these devices have become central to our lives, offering a gateway for fraudsters to target both users and telecom providers. Urgent action is needed to meet this growing threat head-on, as well as the alignment of global telco fraud prevention strategies with future-proof fraud tools.

Fraud always follows the money - highlighting fraud trends in emerging markets

FinTechs are booming in emerging markets like Africa, Asia, and Latin America, bringing financial inclusion to millions. But with this growth comes a surge in fraud – a whopping 80% of fraud cases in Africa involve fake IDs. While biometric identification helps, fraudsters are adapting. FinTechs need a 360-degree view of identity to combat evolving threats.

Stepping up the fight with shared fraud consortium data

Fighting fraud is a constant battle, as criminals keep changing their tricks. To stay ahead, businesses need strong identity checks, smart technology, access to multiple unique identity datasets and reliable fraud protection. A big help is shared fraud data across industries. This pool of information about past and present fraud gives us valuable clues about how criminals work. By analyzing this data with powerful AI, it becomes possible to better understand how customers behave and spot potential anomalies.

  • Global fraud consortium networks can be very helpful. Bringing together businesses from different industries to share information and work together against fraud.
  • Industry collaboration for fraud prevention is key. By working together, businesses can share best practices and identify trends that might be missed if they worked alone.
  • Shared fraud data across industries is essential. Different sectors help identify broader patterns and trends. Real time fraud feedback data can identify fraud networks quickly, minimizing potential losses.
  • Collaborative fraud detection strategies are important. Groups of businesses identify and stop fraud using advanced analytics, data mining, and artificial intelligence.

Adapting to evolving fraud risks: don't let fraud slow you down

Don't let fraud harm your business. Partner with TransUnion and level up on trust. Help protect your customers and strengthen your reputation with robust identity verification and fraud detection solutions.

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