By Abhishek Mithal . February 15, 2023 . Blogs
Rapid digitization and fluctuating economic headwinds have created the perfect breeding ground for fraudsters to thrive. According to the recent State of Fraud Benchmark Report, financial institutions have lost over $500k to fraud in 2022 alone.
As payments become increasingly digital, businesses across different sectors have become extremely vulnerable and susceptible to payment fraud. Continuous disruption brings with it several technology, regulatory, and behavioral shifts, which, when not addressed, can be the reason for a downfall.
So, what sophisticated ways and means are today’s hackers (and disgruntled employees) using to carry out payment fraud? What measures can companies take to thwart these attacks? Read on to find out all this and more!
Looming recession, the ongoing war in Ukraine, political changes, pandemic recovery, and new customer demographics – several factors are altering the current business landscape. But as digital payments continue to make a global-scale impact, incidents of scams and fraud are also growing in number.
Often, many of these frauds are committed by customers who misrepresent their own identity, financial situation, or intention to repay a financial institution. However, there is also a large section of frauds that have been conducted by perpetrators who force people to divulge their identity or sensitive information for personal gains.
That said, let’s look at the top payment fraud trends to watch out for in 2023:
In the coming year, synthetic identity theft is expected to cause substantial losses for customers, businesses, and financial institutions alike. Using potentially valid social security numbers and personally identifiable information, fraudsters will use a combination of real and fabricated credentials to create new synthetic identities and launch attacks. From opening fake accounts to making fraudulent purchases, synthetic digital identity fraudsters are expected to reap $5 billion by 2024.
PYMNTS.com recently announced the U.S. real-time payments market alone to be worth more than $10.5 trillion in 2026. With all forms of digital and electronic payments growing, scammers are rejoicing in the expanded attack surface. Using social engineering and direct outreach techniques, in 2023, fraudsters will exploit the growth of the alternative payment market and coerce individuals to make instant, irrevocable payments.
Buy-now-pay-later (BNPL) platforms have been making several headlines not just for their convenience but also for the threats beneath the surface. Although the BNPL market size is projected to reach $3.98 trillion by 2030, because payments are spread across multiple transactions, bad actors get more opportunities for infiltration. In 2023, the industry will see fraudsters penetrating BNPL platforms to conduct account takeover fraud, either by duping users into revealing personal information or buying it on the Dark Web.
With the Peer-to-Peer lending market expected to touch $804.2 billion by 2023, P2P scams will also surge in popularity in the coming years. Given how easy P2P lending has made it for users to send money with a single click or swipe, it’s this speed that allows fraudsters to take advantage of those not paying attention. From hacked accounts to compromised credentials, stolen devices to lost credit cards – in 2023, tricksters will use several means to trick users and make payments without permission.
Organizations in the financial services industry are prized high-value targets for cybercriminals. With sophisticated bots on the rise, the payments landscape is rife with credit card frauds, account takeover attacks, distributed denial of service (DDoS) attacks, and more. By running automated tasks with malicious intent, bot attacks are set to enable high-speed abuse, misuse, and attacks on websites, mobile apps, and APIs, causing irreversible losses to both users and businesses alike.
Fraud can be enormously damaging for organizations. While there is always a chance to obtain some of the funds back from such attacks and breaches, very few receive all that’s lost. As the new payment markets unfold and instant payments grow in popularity across the world, there are several steps banks and other financial institutions can take to prevent fraud trends from fading into background noise:
The COVID-19 pandemic put digitalization in sixth gear. While all the efforts towards digitalization are sure to reap the rewards in the long run, there is also a higher risk of attacks that need to be addressed.
If you want to successfully operate in a rapidly changing landscape, you will have to strike the perfect balance between demonstrating operational agility, responding quickly to changing customer needs, and protecting customers. Being at the forefront of the latest payment fraud trends and the ways and means to thwart them can allow organizations to safeguard their business, protect their customers, and minimize the threat surface for fraudsters to thrive.
At Verinite, we help businesses successfully navigate this utterly sophisticated payment space. Explore our offerings here.