During PAY360, the dedicated payments-focused event, its organisers, The Payments Association conducted a survey of its attendees to understand the fraud landscape and what organisations are most fearful of.

The Payments Association asked three questions to those leaving the event, about their views on fraud. The aim of the survey was to help firms in the space understand where resources should be allocated to protect their data and consumer funds.

The three biggest fraud types identified by attendees were APP fraud, identity fraud and AI-enabled fraud.

Thirty-nine per cent of respondents said that in 2024, someone being tricked into buying goods that don’t exist or send a bank transfer to a fraudster impersonating someone else, otherwise known as APP fraud, would be the biggest cause for concern. More complex and financially damaging types of APP fraud include romance scams.

Other concerns

Following this, 18 per cent identified identity fraud and 23 per cent of respondents said AI-enabled fraud as the main threats that needed resources. While both share some similarities with APP fraud, AI is increasingly being used as a force-maximiser by fraudsters, who can use Large Language Models to communicate with their targets in a broadly realistic way. Identity fraud can be used to make a scam seem more realistic by hijacking the established identity of a real person.

Tony Craddock, director general of The Payments Association, commented: “The survey results show that our focus on APP fraud as a major vector of losses for both business and the general public was correct. Around £240million was lost to APP fraud in the first six months of 2023, and this figure is likely to increase, at least in the short term as payments companies struggle to adapt to new forms of fraud.

“We expect these adaptations to include enforcing pauses on payments from time to time, to validate a transaction when the payment is out of the ordinary, so consumers will no longer be able to expect faster payments to be fast.”

Finding a solution

To turn the tide, more than half of respondents (57 per cent) said that the next game-changer in the fraud prevention space will be AI. This is already used extensively throughout anti-fraud operations, but is continually becoming more powerful and precise.

While AI can be seen as a threat, according to 57 per cent of respondents, it can also be the game changer that can protect users from fraudsters. In fact, the technology is already used extensively throughout anti-fraud operations and is continually becoming more powerful and precise.

Lastly, when asked how their company stays updated on emerging fraud trends and threats, 43 per cent said that collaboration with other financial institutions, and 21 per cent said industry reports were key. This highlights the importance of intelligence sharing and staying connected to work together as an industry.

How to optimise AI

Riccardo Tordera, head of policy and government relations for the Payments Association added: “We’re watching the development of AI in this space very closely. We have known for years that machine learning is the only thing with the sophistication and the capacity to tackle increasing volumes of fraud, but it’s not a simple case of installing an AI solution and watching it clean up fraud on your system.

“It needs careful monitoring and optimisation to be truly effective, and this can be enabled by working together to share best practices.

“We fully expect the technology to be part of upcoming, future-forward regulations like PSD3, and we’re working with the industry to better help them separate genuine solutions from the hype.”

PXP Financial, the global acquiring, payment, fraud, and data analysis service provider, has received accreditation from Mastercard to become a Token Service Provider.

Accreditation was supported by the Mastercard Digital Enablement Service (MDES), a single integrated platform enabling the digitation of supported Mastercard card types. MDES provides PXP Financial with a Secure Card on File tokenisation programme, a better user experience and higher approval rates for merchants leveraging Mastercard tokens.

Leveraging Mastercard’s Secure Card on File technology means PXP Financial can provide an additional layer of security for its customers accepting online and in-app purchases.

With experts estimating that there is a new case of identity theft every 22 seconds, and anticipating this ratio to worsen this year, the MDES helps to protect cardholders from becoming victims as it converts their most sensitive information into non-sensitive digital tokens.

Digital tokens are used for secure e-commerce and in-app transactions, rather than using the customer’s primary account number (PAN) which remains in a token vault. Digital tokens then safely travel through the e-commerce website or app, without exposing any payment card details. Device-specific tokens add an additional layer of security.

Combatting a rise in fraud

Kamran Hedjri, CEO and founder of PXP Financial, commented: “Ensuring cardholders can enjoy peace of mind is paramount in today’s global marketplace. We know merchants are under pressure to combat the rise in fraud while providing smooth and convenient payment experiences that help to drive sales and foster customer loyalty.

“At PXP Financial, we take our responsibility to merchants navigating this landscape incredibly seriously, keeping our client base across the world at the cutting edge of payments innovation while maintaining a laser focus on security. Our move towards the use of scheme tokens is representative of this commitment.

“Mastercard offers a highly secure, globally scalable solution, with significant speed to market, along with an industry-leading reputation for excellence in payments that will support our merchants to build the trust that is so vital today. We are delighted to announce our accreditation.”

As well as reducing risk, digital tokenisation offers a variety of benefits including assisting in remaining compliant with PCI DSS, increased approval rates, and enabling faster, more efficient transactions. While it bears similarities to encryption, digital tokenisation differs greatly; for example, with digital tokenisation, the sensitive data never leaves the original organisation it was shared with.

When it comes to fraud, older generations are less likely to commit it and fall victim to it according to Sift, the AI-powered fraud platform. 

In its latest findings, Q1 2024 Digital Trust & Safety Index, Sift has uncovered that 33 per cent of Gen Z survey respondents either have, or know someone who has participated in payment fraud. This is compared to only 10 per cent of Baby Boomers. Additionally, 34 per cent of Gen Z consumers have seen offers to participate in online fraud, compared to only nine per cent of Baby Boomers.

“These generational divides are blurring the line between bad actor and consumer,” said Kevin Lee, VP of trust and safety at Sift. “Younger generations are composed of digital natives who are both facing troubling levels of economic anxiety and tend to be more trusting of digital spaces – often at the expense of their online security.

“They’re also exposed more often to offers to participate in fraud schemes. These converging factors mean merchants and payment processors have to think differently about the full spectrum of risk and how to stay ahead of it.”

Fraud Industry Benchmarking Resource

In addition to surveying consumers, the Q1 Digital Trust & Safety Index relies on data from the Fraud Industry Benchmarking Resource (FIBR), an online tool powered by Sift. It allows anyone to access key fraud metrics across industries, geographies, and time. The report explores payment fraud increases across key verticals, payment attack rates for top card issuers, and shifts in consumer buying behaviour due to trends in payment fraud.

For example, findings indicate that fraudsters are turning their focus to high-velocity transactions in the hopes of staying undetected. Across the Sift Global Data Network in 2023, specific industries experienced major spikes in attempted payment fraud: iGaming saw a 93 per cent increase, ticketing saw a 68 per cent increase, food ordering and delivery saw a 53 per cent increase, and retail saw a 46 per cent increase.

Industry reports indicate that globally, merchant losses due to payment fraud reached $38billion in 2023. They are expected to soar to a cumulative total of $362billion by 2028.

Evolving consumer attitudes

The start of 2024 brought increased economic pressure to both consumers and businesses, driven by persistent inflation and high-interest rates. This economic anxiety has led to a shift towards value-seeking behaviour. Shoppers are now preferring to purchase cheaper goods and services and “dupes” over premium brands. The macroeconomic backdrop is expected to remain unpredictable, with global events creating turbulence and increasing the likelihood of scams—many of which could be upleveled by generative AI.

Findings from Sift’s survey of 1,052 adults (aged 18+) across the United States in February 2024 highlight the impact of digital risk on economic uncertainty. It reveals that the increased threat of AI-powered fraud is already influencing consumers’ online shopping behaviour.

In fact, 30 per cent of those surveyed shop online less frequently due to the cybersecurity threats posed by artificial intelligence. Furthermore, 76 per cent would stop using or shopping on a site where they had been a victim of payment fraud. With 43 per cent of consumers saying they have been a victim of payment fraud at least once in the past 18 months, there’s potential for a meaningful impact to businesses’ revenue if the industry fails to get ahead of payment fraud attacks.

“As consumer spending habits evolve and fraud becomes supercharged by AI, businesses need to fight fire with fire, and leverage AI to their own advantage. It’s a necessary piece in the growing challenge of delivering consumer experiences that are seamless and secure,” concluded Lee.

Form3, the cloud-native account-to-account platform, has launched a new authorised push payment fraud (APP fraud) prevention solution, powered by Feedzai, the anti-fraud and financial crime software provider.

The new product from Form3 and Feedzai is built using fully supervised machine learning, leveraging collaborative intelligence to understand the behaviour of both the payment sender and recipient, to determine the risk of the payment being made in real-time.

Form3’s new APP Fraud solution combines its account-to-account payment processing with Feedzai’s fraud and financial crime analytics, to create a model that identifies risk in both the individual sending the money and the person receiving the money. Understanding who is receiving the money is key to preventing fraud, as APP fraud involves impersonation that manipulates the victim into sending the money.

This new solution closes the gaps in intelligence that the fraudsters utilise to be able to use faster payments to target UK consumers and businesses. The solution’s model is then able to detect 95 per cent of fraud at market-standard false positive rates.

Mike Walters, CEO of Form3, commented: “The best way to tackle the rise of APP fraud is the use of collaborative intelligence and cutting-edge technologies that allow the real-time identification of scams within the payment message.

“By bringing together Form3’s payment processing expertise, and Feedzai’s fraud and financial crime solutions, we can tackle APP fraud so that UK banks can make faster payments safer. Feedzai is the solution provider of choice for two of the top four financial institutions in the UK, so we are partnering with a market leader to combat APP fraud.”

A £500million problem

Recognising that APP fraud losses account for nearly £500million per year, Form3 developed this new solution on the back of new regulation from the Payment Systems Regulator. This sees APP fraud victims given refunds by their bank from October 2024, with reimbursement now the responsibility of both the sending and the receiving institutions.

Pedro Barata, CPO at Feedzai, also added: “There is increasing regulation in this space, and rightly so – we’ve got to do everything in our power to protect the end consumer from APP fraud. With reimbursement becoming mandatory from October this year, it’s also in the interests of all banks to collectively ensure they prevent fraud and save huge payouts.

“By combining the expertise of Feedzai and Form3, we can drastically reduce the level of vulnerability in the payment process and give our customers the real-time intelligence that they need to stop fraudsters in their tracks.”

The partnership underscores Form3’s commitment to ‘doing well by doing good’, by employing technology to tackle the pervasive issue of fraud, which has profoundly impacted countless individuals worldwide.

The service will go live in April, with a full rollout in the UK market expected in the summer of 2024 – ahead of the implementation of the new rules in October 2024.

Visa has introduced three new AI-powered risk and fraud prevention solutions to enhance security in digital payments.

The new products, integrated into the end-to-end Visa Protect suite, aim to diminish fraud across immediate account-to-account and card not present (CNP) payments, as well as transactions both on and off Visa’s network.

Visa Protect is part of a broad suite of Visa value-added services, which has expanded to include nearly 200 products across five popular categories: acceptance, advisory, issuing, open banking, and protect.

Antony Cahill, global head of value-added services at Visa, said: “Digital payments go far beyond completing a sale – we are entering an era of modern commerce where winners move fast, AI is essential, experiences are flexible and security is native.

“Businesses are looking for partners that can enable their ambitions to compete and win and we’re proud to be the trusted partner helping a growing number of clients do exactly that in today’s highly competitive environment.”

Visa says security and fraud prevention are fundamental aspects of its operations.

Security and fraud prevention are fundamental to Visa. In 2023, Visa successfully thwarted $40billion in fraudulent activities, marking a significant increase from the preceding year.

Its new solutions include:

• Visa Deep Authorisation (VDA): This solution is tailored to help issuers mitigate the challenges they face due to the rising complexity of digital fraud. Utilising deep learning AI risk models and vast amounts of contextual data, VDA offers a new transaction risk scoring mechanism specifically optimised for card not present (CNP) payments.
• Expansion of Visa Advanced Authorisation (VAA) and Visa Risk Manager (VRM) for non-Visa card payments: Visa’s AI-driven fraud risk management solutions are now agnostic to network schemes. This expansion enables issuers to streamline their fraud detection operations, resulting in strengthened fraud protections and reduced operational costs.
• Real-time, account-to-account payment protection: a fraud prevention solution designed specifically for immediate payments, including peer-to-peer (P2P) digital wallets, account-to-account transactions, and central banks’ instant payment systems. Powered by advanced deep learning AI detection models, this service provides real-time risk scoring, empowering financial institutions to proactively block fraudulent transactions before they occur.

Each product will be available to clients starting in the first half of 2024, with varied launch dates by product and market.

“Real-time, digital payments are nearly ubiquitous, creating a need for security solutions that are transformative and adaptive to the real-world,” James Mirfin, SVP, global head of risk and identity solutions, Visa, also added: “As digital fraud grows in volume and sophistication, Visa is keeping pace by bolstering our powerful suite of risk and fraud solutions through our unmatched technology innovation and AI expertise, and expanding their utility beyond the Visa network.”

The fraud prevention industry is experiencing rapid growth in response to amplified regulatory pressure and increasingly sophisticated threats of online fraud.

Dorian Maillard, vice president at investment bank  DAI Magister, outlines the significant growth of the fraud prevention market due to the rise of digital payments, stressing the need for companies to enhance their strategies in response to evolving fraud risks and tighter regulations.

The meteoric rise of digital payments over the past decade has been a double-edged sword. It has revolutionised convenience for consumers and created new business opportunities, but it has also opened a Pandora’s box of fraud risks.

This growing threat landscape is set to significantly propel the growth of the fraud prevention market, which is predicted to more than double to $67billion by 2028.

Digital payments, encompassing everything from online shopping and mobile payments to e-commerce, have created a vast new playing field for fraudsters to exploit. These malicious scammers are growing in number and refining their strategies, employing ever more sophisticated methods, including account takeovers, synthetic identity fraud, and social engineering scams. In the UK alone, fraudsters syphoned off £1.2billion in 2022, with almost 80 per cent of app fraud cases starting online.

As the financial toll climbs, regulators worldwide are stepping up, implementing stricter security and compliance mandates to safeguard the digital payment ecosystem and enforce corporate accountability in fraud prevention. The UK’s recent Economic Crime and Transparency Act 2023, which includes a provision to make businesses liable if they fail to prevent staff or a connected third party from committing an economic crime, is one such example.

Amid this backdrop, where advanced fraud schemes meet tightening regulations, companies across industries have little choice but to elevate their fraud prevention strategies. Investing in advanced solutions that can navigate the evolving regulatory landscape and protect against increasingly sophisticated tactics has become more critical than ever.

Key benefits of digital fraud prevention tools

Real-time monitoring leveraging fraud detection algorithms

The power of modern fraud detection tools lies in their ability to monitor transactions and user behaviour continuously, in real time. By analysing vast datasets, these tools can spot anomalies that signal fraudulent activities, such as unusual spending patterns or suspicious login attempts, with greater accuracy and efficiency. This ensures enhanced protection against fraudulent activities while allowing legitimate transactions to flow smoothly without unnecessary interruptions or delays.

Scalability and customisation

As businesses grow, so does their need for scalable and customisable fraud prevention solutions. Cloud-native digital fraud prevention tools are particularly adept at meeting these needs, offering the flexibility to scale with a business’s growth and the adaptability to respond to evolving transaction volumes and fraud strategies. These tools also enable businesses to tailor their fraud prevention measures, allowing for the integration of industry-specific rules and parameters that align with their unique risk profiles.

Enhanced security and regulatory compliance

In sectors like finance, healthcare, and technology, stringent regulations govern the protection of sensitive information from unauthorised access or misuse. These regulations mandate comprehensive measures, including data encryption, secure storage, meticulous access control, and detailed reporting of security breaches or suspicious activities. Integrating digital fraud prevention tools that offer multi-layered security features, such as encryption, authentication, and robust access controls, allows organisations in heavily regulated sectors to meet these stringent security requirements more efficiently and effectively.

Improved customer retention and financials

Implementing strong fraud prevention measures demonstrates a business’s commitment to protecting its customers’ security, an essential aspect of building a trustworthy relationship. This commitment instils trust and fosters a deep sense of loyalty among customers. When customers feel secure and valued, they are more likely to continue using the services or products of a business, leading to increased customer retention. Over time, this loyalty translates into sustained revenue growth as satisfied customers make repeat purchases and are more likely to recommend a business to others, expanding the customer base and boosting revenue further.

AI-native technologies unlock new possibilities

Advanced fraud detection and prediction

AI-powered fraud detection utilises advanced algorithms to do more than analyse real-time transactions. These algorithms learn from historical trends and predict potential fraud risks before they even happen. This proactive approach offers a significant advantage over traditional methods, which often play catch-up with fraudsters’ ever-evolving tactics.

Multi-dimensional analysis

AI algorithms are powerful detectives in the fight against fraud. They can analyse diverse data sources, such as transaction history, device fingerprinting, geolocation data, and social media activity, to create a comprehensive risk assessment for every transaction.

Automation of operations

AI automates many aspects of fraud detection and prevention, significantly reducing the need for manual intervention and enabling organisations to efficiently process a higher volume of transactions.

A consolidated future for fraud prevention

The battle against fraud faces a double threat: smarter criminals and stricter regulations. Fraudsters are deploying ever-more sophisticated tactics, leading to billions in losses annually. Adding fuel to the fire are increasingly stringent regulations, especially for companies operating across borders. This creates a perfect storm – businesses need advanced technology to combat a growing array of fraud risks while navigating complex compliance requirements in multiple regions. The diverse and complicated nature of these challenges is increasing the demand for comprehensive fraud protection solutions incorporating advanced analytics, machine learning, and AI capabilities.

Consolidation allows fraud prevention providers to acquire the advanced technologies and expertise to offer more comprehensive and globally scalable solutions to meet these requirements. It also enables providers to cater to growing customer preferences for integrated, end-to-end solutions that provide a wide range of capabilities, from detection to prevention and mitigation.

Rapid technological advancements will also likely further propel this consolidation in the sector as developing effective in-house AI-native solutions is becoming increasingly complex and resource-intensive, especially for large incumbent players that have yet to fully embrace the technology and AI shift.

The UK Government has published a draft legislation to extend payment service providers’ (PSPs) time to analyse potential fraudulent transactions, by 72 hours on top of the current business day they already have. We reached out to the industry to uncover if the move will be as useful as intended or if it will only delay legitimate transactions and negatively impact consumer experiences.

According to the finance ministry, Brits lost over £485million in 2022 due to authorised push-payment (APP) fraud; this occurs when a fraudster tricks a victim into transferring them money. The proposed new legislation will give financial institutions extra time (three additional days) to evaluate if a consumer is being taken advantage of or if it is a legitimate transaction.

Mandatory changes to reimbursement 

Currently, if a consumer falls victim to this sort of fraud, there is no requirement by a bank to reimburse the consumer’s loss and while many do, it’s very dependent on the bank. However, the Payments System Regulator, one of the payments regulators in the UK, has issued that from 7 October 2024, banks and other payment firms must reimburse consumers hit by APP fraud.

The most consumers can get back from a scam is £415,000, with users potentially having to pay up to £100 before making the claim. This limit matches the Financial Ombudsmen Service’s (FOS) when dealing with its complaints.

The ministry’s new legislation will look to launch on the same day as the Payments System Regulator’s reimbursement legislation.

More time is needed

With reimbursement becoming mandatory, it comes as no surprise that firms need more time to determine if a transaction is fraudulent or not. However, this added time could slow down consumer transactions. Kate Troup, a financial services regulatory lawyer at law firm Fladgate, explains how the ‘golden era’ of instant payments is over. Rhey will now likely slow down so financial firms can make the right decisions on legitimate or illegitimate transactions.

“Once payment firms are required to reimburse all victims of authorised push payment fraud then it is likely that we are going to see more friction in the online payment system – slowing down transactions to enable payment firms to investigation suspicious transactions.

“At the moment, there are a number of cases where customers quite quickly realise that they have been the victims of fraud but by the time their bank or payment firm contacts the receiving firm the payment has disappeared and cannot be recovered. When the new rules come into force and the receiving firm is required to make a mandatory reimbursement to victims of fraud it is likely that some firms will impose a delay between a one-off unexpected payment into an account and a subsequent payment out.”

Liability lies with banks, not consumers

According to Silvija Krupena, director of the financial intelligence unit at RedCompass Labs, a payment and financial crime service provider, there has been a shift in responsibility when it comes to fraud. While previously the onus was on consumers to be aware of who they were transacting with, Krupena says things have now changed and banks are expected to step up.

“When it comes to fraud, liability is shifting from consumers onto banks who are increasingly being expected to refund their customers when fraud takes place. Banks have already made huge investments into fraud prevention adopting tools such as confirmation of payee which helped them stop £650.7million worth of fraud in the first half of 2023, a 10 per cent increase from the latter half of 2022.”

Krupena looks towards technology as a means of saving financial firms from needing to make enormous payouts. “Banks need to explore new technologies such as AI and data-driven, persona-based approaches, otherwise, they could be on the hook for hundreds of millions in fraud losses.”

A similar view was shared by James Gliddon, partner at national law firm, Foot Anstey, as he noted the importance of tech in ensuring consumers are not paying the price with long transaction times. “Given the volume of payment instructions, it is very unlikely that there could be a manual or human interaction – which is sometimes the only thing that can disrupt the fraud in action. We can expect the increased adoption of tech/AI tools to analyse and optimise any interventions.”

Banks must actively look to prevent fraud

Emma Lovell, chief executive of the Lending Standards Board, the body, explains how consumers must be protected by banks through active fraud prevention, rather than letting consumers fall victim and then helping them.

“Our experience of overseeing the only existing framework for APP fraud prevention, detection, and reimbursement – the Contingent Reimbursement Model Code – has demonstrated the importance of taking a consistent, sector-wide approach to tackling fraud.

“The incoming Payment Systems Regulator framework introduces mandatory reimbursement for APP fraud victims from all PSPs, but it is important that prevention and detection don’t get left behind. You can stop consumer harm from APP fraud by stopping these scams in the first place.

“The legislation proposed today is positive, and can be part of a bigger picture approach on prevention and detection. A new APP Fraud Prevention Standard is needed to ensure the industry has a consistent approach to stopping scams.”

Yes banks have a role to play but consumers must help themselves

Although banks have a large duty to play in protecting consumers with fraud prevention tools, it is crucial that consumers learn how to spot potential fraud themselves. Will Christopher, civil fraud partner at law firm Kingsley Napley, explains how the new legislation “doesn’t take away from the need to continue to educate the public about the sophisticated tactics that scammers employ.

“Common APP frauds include romance frauds through to frauds where the scammers operate seemingly plausible investment websites, especially in the crypto space. Scammers may even pose as the banks themselves to dupe their victims.

“We are frequently contacted by people who have lost sizeable sums to APP. Where losses exceed £415,000 there are steps that can be taken via freezing injunctions and search orders to recover funds but this is by no means a failsafe route.

“Whilst today’s proposals are to be welcomed, therefore, it is still the case that prevention is better than cure and the public must remain vigilant. Regardless of the measures in place, scammers will continue to evolve and adjust their strategies to game the system.”

Artificial intelligence (AI) has been a godsend in the fintech industry. It has been able to vastly improve a lot of customer experiences as well as improve back-end data analysis for firms too. However, bad actors have also been able to abuse the tech, and in 2024, 87 per cent of industry experts have acknowledged the tech could be used to drive fraud attempts according to a new SEON report.

The end-to-end fraud prevention and AML platform, SEON, has published its latest findings in its Fraud Trends 2024 guide, revealing businesses’ challenges for the year ahead. Some of these challenges include volume, cost, and complexities of fraud. Despite a generally optimistic outlook on the fintech market for the upcoming year, increased fraud sophistication and frequency pose significant threats to the industry.

The report, informed by an extensive survey of 316 cross-industry experts and enriched with proprietary and independent fraud research, casts a spotlight on the pressing issues and strategic imperatives for businesses navigating fraud’s complex terrain.

AI will not be the only development accelerating fraud attempts. The guide also identifies the proliferation of fraud-as-a-service (FaaS), and the demand for fast transactions and escalating economic pressures as reasons for an increase in fraud.

A proactive anti-fraud strategy is no longer a nicety – it is a necessity 

“The time for decisive action is now,” said Tamas Kadar, CEO and co-founder, SEON. “Business leaders and fraud and risk management teams must combat the increasingly sophisticated and complex emerging threats we are now seeing at scale thanks to advanced technologies like AI and machine learning. This report signals that companies can no longer afford to not have a proactive anti-fraud strategy. To safeguard their revenue, it’s imperative to adopt a comprehensive approach to fraud prevention.”

The guide also identifies the dual role of AI in fraud dynamics, rising fraud types and countermeasures and the importance of strategic investment in fraud prevention.

AI is expected to be the biggest challenge for fraud prevention in the coming months. In fact, 71 per cent of respondents named it as the number one issue, particularly in automated attacks and deepfake technologies.

Seventy-three per cent of respondents expect an uptick in these types of fraud: phishing, synthetic fraud, identity theft, account takeovers (ATO) and money-laundering.

Overcoming cost and integration issues will prove essential for effective fraud prevention with 57 per cent of respondents also planning to increase their spending on anti-fraud solutions in the year ahead.

As fraud continues to evolve, stopping fraud earlier in the customer journey will become a priority. Real-time data and AI-enhanced technologies are emerging as powerful tools to help businesses tackle rising fraud volumes.

On this week’s episode of News & Views, The Fintech Times Podcast Team speak about a new report by FICO uncovering Brits’ attitudes towards fraud and cybersecurity measures, the Revolut AI-scam feature that uses sophisticated machine learning to detect if a customer is being scammed and the value of reported UK fraud doubling to £2.3billion in 2023, but the true value likely being much higher.

After a week full of fraud news, Polly, Tom and Francis make this episode a fraud special, focusing on different aspects of how cybercriminals have evolved and how firms are tackling fraud. The trio start the conversation by discussing how banks and challengers are utilising AI to protect consumers, spotlighting Revolut and its AI scam detection feature.

They then speak about the lack of transparency in fraud reporting. The Podcast Team goes back and forth on whether it is better to be more ethical and disclose fraud stats to the public or keep them locked away in an attempt to save their image.

The final talking point on the fraud special looks at biometrics. While previously biometrics had been viewed as a foolproof way of ensuring no one could access data, the emergence of AI has called biometric security’s strength into question. The conversation is concluded with the trio deciding if biometrics are a solution of the future, or simply a cool nicety.

Listen to News & Views Podcast on your favourite platform:

    

Read the articles discussed in this episode:

Biometrics are UK Consumers’ Favourite Security Measure as Desire For Fraud Protection Increases

Revolut Card Fraud Dropped by 30% Since Scam Detection Feature Launch

Reported Fraud Doubles, But True Fraud Levels Likely to be Significantly Worse; Warns BDO

The need and desire for fraud protection has evolved. Once simply viewed as a necessary overhead, good fraud prevention measures are now a very strong way of obtaining new customers and keeping existing ones. In fact, nearly three in four consumers (73 per cent) rank good fraud protection as a top three consideration when opening a new account according to FICO research.

FICO, the analytics company, published a report, titled Fraud, Identity, and Digital Banking Consumer Survey 2023 – United Kingdom uncovering Brits’ attitudes towards fraud and cybersecurity measures. It reveals at what point consumers decide to stop their onboarding process due to complicated measures.

“Financial institutions should use fraud protection as a competitive advantage,” commented James Roche, a principal fraud consultant at FICO. “Customers are looking for providers they can trust, so institutions should shout about the excellent fraud protection they provide. But when it comes to application and onboarding, they must be sure those protections, fraud checks and identity proofing are appropriate, proportionate and time-efficient to reduce the chance of dropouts.”

While 73 per cent of consumers said fraud protection was a top three concern when opening a new account, 34 per cent ranked it as a top priority. Biometrics were a top choice for security measures with 68 per cent preferring to use fingerprints. Just a few years ago biometrics was an unknown science for consumers. The FICO research shows the shift, as 54 per cent believe fingerprint scans provide essential protection; 52 per cent ranked face scans and 49 per cent iris scans.

However, more education is still needed on behavioural biometrics, with just 17 per cent believing these provide excellent protection.

Complicated, but not too complicated

However, firms must walk a fine line as making identity checks too complicated would result in account opening abandonment as almost one in five (18 per cent) said over-complication or time-consuming set-up put them off opening a new account.

Whilst 34 per cent said they are more likely to open a financial account digitally than they were a year ago, the expectation for a frictionless experience has also increased. Consumers expect the application process to be fast. Almost one in five will abandon an application if the checks are too difficult or take too long. Two-thirds expect to spend less than 30 minutes opening a current account.

“If one place in the onboarding process sees a high proportion of dropouts, FIs should consider altering the order in which checks are made and whether some could happen once the customer has been accepted,” added Roche.

Biggest fears

The FICO report also identifies the financial crimes that consumers are most worried about. Identity theft to open a new account is the top-ranked concern at 30 per cent. Bank account takeover was ranked the crime most feared by 20 per cent of respondents. In third place, 16 per cent ranked being tricked into sending money to a fraudster as the top concern. Giving customers confidence that a financial institution is using the best processes to mitigate against these threats is, therefore, critical.

“Aiming for completely frictionless experiences could leave a financial institution over-exposed to fraud,” concluded Roche. “Indeed, appropriate friction can actually help customers feel protected. The reality is, checks must be proportionate and personal to each customer and interaction. Therefore, fraud protection needs to be adaptive. It must use all streams of customer data for the best outcome for the customer and the institution.”