THANK YOU FOR SUBSCRIBING
COVID-19 acted as the ultimate catalyst for digital platform transitions, shrinking five-year plans into five-month business transformations. While digital transformation has undeniable benefits, such as reduced costs and real-time accessibility, the rapid shift to online meant security checksand fraud detection methods often took a back seat compared to other priorities. As businesses find their footing in our new normal, many have discovered that the pivot to digitalhas left systematic vulnerabilities that could heighten both their own and their customers’ risksof becoming victims of fraud.
From January 2020 to early February 2021, the Federal Trade Commission revealedthat consumers reported over 345,000 complaints resulting in more than $325 million in COVID-19-related fraud losses.With fraud complaints on the rise, below are five types of fraudulent activity to look out for in 2021 and how to prepare.
Five Fraud Threats for 2021
1. Putting a Face to Frankenstein IDs: Synthetic identity (ID) fraud is currently the fastest growing type of financial crime in the United States. To create a synthetic ID, a fraudster combines real and fake information to create an entirely new identity. Experian expects fraudsters to use fake faces for biometric verification. These “Frankenstein faces” will use AI to combine facial characteristics from different people to form a new identity, creating a challenge for businesses relying on facial recognition technology as a significant part of their fraud prevention strategy.
2. Too Good to Be True” COVID Solutions: With the distribution of vaccines underway and wider availability of rapid COVID-19 testing, Experian expects that fraudsters will continue to find opportunities to capitalize on anxious and vulnerable consumers and businesses. Everyone needs to be vigilant against fraudsters using the promise of at-home test kits, vaccines and treatments as means for sophisticated phishing attacks, telemarketing fraud and social engineering schemes.
3. Stimulus Fraud Activity, Round Two: For Americans suddenly out of work or struggling with the financial fallout from the pandemic, 2020’s government-issued stimulus funds were a welcome relief, but also an easy target for fraudsters to commit scams. Experian predicts fraudsters will take advantage of additional stimulus funding by using stolen data from consumers to intercept stimulus or unemployment payments.
4. Say ‘Hello’ to Constant Automated Attacks: Once the stimulus fraud attacks run their course, Experian predicts hackers will increasingly turn to automated methods, including script creation and credential stuffing to make cyberattacks and account takeovers easier and more scalable than ever before. With billions of records exposed in the U.S. due to data breaches annually, this type of fraud will prosper in 2021 and beyond until the industry moves away from its reliance on usernames and passwords.
5. Survival of the Fittest for Small Businesses: As a result of COVID-19, businesses were left with no choice but to quickly shift to digital to meet the needs of consumers, and some were more prepared than others. In 2020, consumers may have been willing to give businesses time to adjust to the new normal, but in 2021 their expectations will be higher. Experian predicts businesses with lackluster fraud prevention tools and insufficient online security technology will suffer large financial losses in 2021 and beyond.
How to Combat Fraud
With the different types of fraud that exist, businesses should prepare themselves by:
1. Getting an Assessment on your Current Fraud Problem: First, organizations can work with a fraud prevention partner to assess where fraud already exists and understand the full scope of the issue. By running analyses on your current portfolio, an expert partner can flag potentially fraudulent accounts and advise you on the best next steps.
2. Implementing a Fraud Detection Plan: With the uptick in fraud in the last year, it’s important for businesses to utilize a multi-layered approach to detect fraud, especially at account opening. Data paired with advanced analytics can provide helpful insights to combat your current fraud issue and flag new risks as well.
3. Incorporating a Communication Plan: A simple step that organizations can take to help prevent fraud is to put a new communication strategy in place with their customers. Email and social media can be vehicles for consumer education tips on how to avoid fraud, helping customers to become more mindful of common fraudster tricks such as phishing attacks and social engineering schemes. A refreshed customer outreach plan can also provide businesses an opportunity to demonstrate the steps being taken to protect their customers from fraud and identity theft.
As fraud continues to evolve, businesses must stay vigilant against emerging threats. Keep these fraud predictions and prevention tips in mind as your business prepares for the road ahead.