While fraud prevention may seem like something that happens behind the scenes, a recent report states it can have a serious and rising impact on the customer experience.
The Sixth Annual Fraud Report by IDology details trends in fraud prevention and sheds light on the growing concern around fraud prevention creating too much customer friction. Consumers are increasingly aware that data breaches and digital fraud are increasing at a rapid rate, and that their personal information could already be available on the dark web. For example, IDology’s 2018 Consumer Identity Study showed that fifty-three percent of consumers surveyed are “extremely concerned” or “very concerned” their personal information has been exposed in a data breach. Even though they are worried, consumer tolerance for increased fraud prevention tactics only goes so far. In fact, the report revealed that striking a balance between fighting fraud and minimizing customer friction has become the single biggest fraud prevention challenge businesses face.
The Annual Fraud Report surveys hundreds of executives and analysts in risk, fraud, compliance, product and operations to capture the impact and perception of fraud on leading companies. Rather than focusing on specific incidents and transactions, this research is based on first-hand feedback from professionals working to fight fraud in their organizations.
Among the key findings and observations in the report:
Fraud is Booming
Fraud is increasing in many forms but particularly in customer-not-present, online environments. Fifty-eight percent of businesses experienced more fraud this year compared to last, which is double the number that had the same level year over year. Sixty-seven percent of companies reported an increase in online fraud and sixty-three percent experienced an increase in mobile fraud. What’s behind this increase? A key driver is the frequency and depth of recent data breaches that have made more personal information accessible by criminals.
Contact centers also experienced increases in fraud, though not at the same levels as online and mobile channels, with thirty-eight percent of companies stating they experienced increased fraud, and fifty-three percent saying it stayed the same.
With fraud growing across channels, business owners, as well as companies’ fraud pros, should be aware of multi-pronged and multi-channeled attacks that put siloed companies at a disadvantage. Fraudsters leverage tactics like social engineering and phishing to find vulnerabilities across contact centers, mobile devices, and online channels. Accessing a fraud data network and sharing intelligence across functions can help companies detect and prevent these type of omni-channel fraud attacks.
Another key takeaway is that mobile fraud stands out as one of the fastest-growing threats, increasing 117 percent over the previous year. When asked which types of mobile-based fraud techniques are most prevalent within their industries:
• 33% said ANI spoofing (caller ID spoofing)
● 27% said porting
● 24% said SMS interception
● 23% said device cloning
● 20% said recycling phone numbers
Mobile device attacks weren’t the only surging fraud schemes companies faced in 2018. These other types of fraud were identified as prevalent in the past year:
● Credit card / debit card / prepaid card fraud (67%)
● Account takeovers (49%)
● Phishing (48%)
● Synthetic identity fraud (42%)
● ACH / wire fraud (38%)
Businesses Feel Least Prepared for Mobile and Synthetic Identity Fraud
With such a high increase in the prevalence of online and mobile fraud, there is heightened concern about detection and prevention. Businesses feel particularly unequipped to handle synthetic identity fraud—a type of fraud in which a criminal combines real (usually stolen) and fake information to create a new identity, which is then used to open accounts and make fraudulent purchases. When asked which fraud schemes they feel the least prepared to detect and prevent:
● 32 percent said mobile device attacks such as malware and hacking, compared to 12 percent in 2017.
● 32 percent said synthetic identity fraud, compared to 26 percent in 2017.
● 25 percent said account takeover, compared to 19 percent in 2017.
Identity Verification Solutions Are Becoming a Competitive Differentiator
When it comes to fraud prevention challenges, companies are also changing the way they approach identity verification, with 85% of firms stating that identity verification can be a strategic differentiator. Customer service representatives can no longer rely on basic “identity matching.” For 75 percent of companies surveyed, identity verification has become much more complicated and complex over the last 3 years, and in many cases leading to additional friction in the customer experience.
As this challenge becomes a top priority, most leading companies are increasing the use of robust, comprehensive digital identity verification solutions with smart layers of fraud protection to maintain strong fraud deterrence while reducing customer friction and frustration.
Companies need to deploy enhanced identity verification systems that locate and approve more legitimate customers faster while deterring fraud. They also need to decrease customer friction (with tools like dynamic escalation) in order to drive revenue and new customer engagement. As these needs continue to rise, evaulating identity verification as a strategic and holistic business practice will become the norm.
For more information download the full IDology Sixth Annual Fraud Report.