Digital fraud is a widespread problem, with fraud losses totaling more than $1.45 trillion annually around the globe.
A fraud attack against a bank or business occurred every two minutes on average in 2019, for a total of 59,627 attacks that year. What’s more, these figures do not take into account the innumerable schemes launched against individuals.
The pandemic has only exacerbated the fraud threat as bad actors exploit economic uncertainties to scam individuals from all walks of life. One especially popular method of digital attack is authorized push payment (APP) fraud, which sees bad actors impersonating trusted merchants or officials and demanding payment from victims for goods or services. Fraudsters perpetrating APP schemes are especially keen on tricking their victims into using real-time rails, as funds sent using these systems are irrevocable and thus cannot be clawed back once scams are uncovered.
In the November edition of the Digital Fraud Tracker®, PYMNTS explores the latest in fraud prevention, including the expanding threat of APP fraud, new cybercrime schemes against businesses, banks and government agencies, and the growing use of data analytics and pattern recognition to identify and counter digital schemes.
The United Kingdom has had some success in its fraud-fighting efforts, with overall fraud levels down 374.3 million pounds ($483.4 million) during the first half of 2020 compared to the year before. APP fraud accounted for 207.8 million pounds ($268.9 million) in losses during this timeframe, however, and remained relatively unchanged year over year. This means that many U.K. financial institutions (FIs) must step up their games to counter such fraud.
Mobile payment apps such as Cash App and Zelle have seen their popularity skyrocket during the pandemic as consumers seek out contactless methods, but their ubiquity is making them more enticing to fraudsters as well. Bad actors can exploit their instant nature to abscond with funds before customers realize anything is amiss. These payment apps are therefore reevaluating their authentication measures to clamp down on APP schemes and other forms of fraud before customers begin to lose faith in the security they afford.
South Africa is also grappling with APP fraud during the pandemic, with the business investment industry bearing the brunt of the damage. Cybercriminals are leveraging many of the same schemes they use when scamming payment apps, but with approaches tailored to this particular field. One common scheme entails fraudsters posing as customers and sending messages to investment managers, asking them to send funds to their own accounts. These funds are almost impossible to get back due to the irrecoverable nature of payment apps, leading many experts to call for more stringent regulations on investment managers to limit the spread of this type of fraud.
For more on these stories and other digital fraud headlines, download this month’s Tracker.
Facing APP Fraud With Customer Education And Machine Learning Tools
APP schemes that capitalize on the pandemic have become widespread as the health crisis wears on, with 22 percent of Americans being targeted by fraud since the pandemic began.
In this month’s Feature Story, PYMNTS spoke with Megan Kakani, vice president of product and innovation at KeyBank, about how the FI deploys machine learning-based pattern recognition tools to prevent APP fraud.
APP fraudsters are running rampant at FIs and merchants across the globe, with the U.K., for example, seeing 57,549 instances of such fraud in the first half of 2019 for a total loss of 208 million pounds ($268 million). Any single prevention method will be hard-pressed to make a dent, but a multifaceted approach could do wonders to reduce its impact.
This month’s Deep Dive explores the worldwide threat posed by APP fraud as well as how FIs are deploying behavioral biometrics and positive profiling to protect their customers.
About The Tracker