How industry and corporate firms can prevent these frauds?
There are several best practice approaches that businesses can implement to protect them against fraudulent attacks. Detecting fraud is the first step in identifying where the risk lies. These risks can then be prevented automatically or manually using fraud detection and prevention (FDP) software, RiskOps tools, compliance tools, and other risk management strategies. FDP solutions, such as analytics, authentication, and compliance, can help reduce fraud losses. Further, various companies are exploring and updating their FDP solution capabilities with technologies like AI/ML, blockchain, and cloud/IoT. Among these solutions, authentication solutions such as single factor, 2FA, and MFA are gaining popularity in the consumer market to protect documents and data from misuse. Consumers have now become familiar and comfortable with the traditional use of passwords for authentication. This attention has shifted to biometric authentication such as fingerprint or facial authentication as a stronger alternative to conventional password-based safety. Businesses can help customers by assisting them with continuous biometric authentication services and reducing fraud risk. These fraud security measures can be used from beginning to end across all digital platforms to help continuously authenticate transactions.
The Fraud Detection and Prevention Market is highly competitive due to numerous players operating in different parts of the ecosystem. According to MnM’s market evaluation framework, most companies opt for inorganic growth strategies to maintain their position in the market. The number of deals increased by around 70–80% in 2020 from 2019. These deals collectively include partnerships, acquisitions, collaborations, and alliances. FICO, LexisNexis, Fiserv, TransUnion, Nice Actimize, FIS Global, SAS SE, RSA Security, Neustar, F5, Kount, FRISS, and SecuroNix are some of the key players in the global FDP market that offer an innovative and broad portfolio of FDP solutions and services.
Recent news/trends in fraud
Data from the US Federal Trade Commission (FTC) states that consumers lost over USD 5.8 billion to fraud in 2021, up from around 70% in 2020. 46% of companies surveyed reported experiencing fraud, corruption, and economic crime in 2022, against 47% in 2020 and 49% in 2018. According to various companies’ press releases, there has been a 44% rise in fraud rates between 2019 and 2021. Back in 2019, the average ID fraud rate was 4.1%, jumping to 5.9% in 2021. Over USD 2.3 billion in losses were attributed to imposter scams, which rose from USD 1.2 billion in 2020; online shopping was the reason for about USD 392 million in losses in 2021, which increased from USD 246 million in 2020. These statistics clearly state that if 2021 and 2022 have proven anything, it is that with increasing development in technologies, fraud techniques are also developing. As time, resources, and technologies evolve, so do frauds and their techniques.
During the pandemic, consumers sincerely embraced the convenience and ease of digital and mobile-based platforms to perform their daily operations effectively. The COVID-19 pandemic has further fueled the fraud rates by providing an open opportunity for fraudsters to steal crucial insights such as Personally Identifiable Information (PII), Social Security numbers (SSN), customer data, and companies’ Intel about their assets, liabilities, and cash flows that have also increased the ransomware attacks.
Impact of these frauds on industries and corporates
The top categories of fraud include – return & discount fraud, gift fraud, online/internet scam, asset misappropriation, healthcare/medicare fraud, payment fraud, and identity theft. These frauds have impacted all industries worldwide, such as banks, insurance firms, investment firms, healthcare organizations, retail and e-commerce companies, corporates, telecommunication, and government institutions. For instance, fraud continues to plague fintech businesses, including large and small institutes. During its earnings call for the fourth quarter of 2021, PayPal chief financial officer John Rainey said that the company identified 4.5 million accounts that it believes “were illegitimately created.” Another major industry that was affected was healthcare. According to a press release by WSJ, the justice department in the US has filed criminal charges against nearly 140 people, including medical professionals, for alleged healthcare fraud schemes that resulted in an estimated USD 1.4 billion in losses.
By increasing awareness about fraud, updating the security of the physical as well as digital infrastructure regularly, and responding to each fraud alarm, businesses can protect their crucial personal and customer information from fraudsters and can focus freely on their business growth and ROI.
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