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  • Writer's pictureRoy Urrico

Digital Fraud Attempts Down in Finservs and Other Industries…But Some Industries Show an Increase

Source: TransUnion

By Roy Urrico

Finopotamus aims to highlight white papers, surveys, analyses, new items and reports that provide a glimpse as to what could, or potentially, impact credit unions and other organizations in the financial services industry.

Customer experience and protection must remain a top priority even as the global digital fraud rate decreased during 2022’s first quarter 22.6% from the same quarter in 2021, according to a new digital fraud analysis from TransUnion.

The Chicago-based information and insights company observed the suspected fraud rate year-over-year (YoY) declined in industries such as financial services, telecommunications and retail while fraudsters significantly increased their scams in sectors such as gambling, insurance and logistics.

TransUnion came to its conclusions regarding fraud against businesses based on intelligence from billions of transactions and more than 40,000 websites and apps contained in its flagship identity proofing, risk-based authentication and fraud analytics solution suite – TransUnion TruValidate. The percent or rate of suspected digital fraud attempts are those that TruValidate customers either denied or reviewed due to fraudulent indicators compared to all transactions assessed for fraud.

Sophisticated fraudsters pressure test industries to determine the those with ramped up fraud prevention measures. As a result, the potential scammers turn to other industries when thwarted, observed

Shai Cohen, SVP, global fraud solutions, TransUnion.

“That is exactly what we have observed recently as fraudsters look for new opportunities or points of vulnerability,” said Shai Cohen, senior vice president of global fraud solutions at TransUnion. “It is paramount that during this dip companies focus on optimizing the customer experience for good customers.”

Consumers also revealed a slight dip as digital fraud targets in a recent TransUnion Consumer Pulse Study. The survey of 10,391 adults in select countries and regions globally from Feb. 7-23, 2022, determined that 36% were digital fraud targets in the last three months compared to 38% the previous quarter. Of those targeted consumers, phishing scams were most common (31%) followed by money/gift card (28%) and third-party seller scams on legitimate online retail sites (23%).

Fraud Attempts Decrease Due to Ramped Up Measures

“Overall, suspected digital fraud attempts have declined as many industries have ramped up fraud prevention measures. However, some industries saw an uptick in fraud attempts, which include insurance, gambling and logistics,” Cohen said.

The overall rate of suspected fraud originating from the U.S. decreased 23.1% when comparing the first quarter of 2021 to the first quarter of 2022 across all industries. The financial services industry saw the largest YoY decrease in the suspected digital fraud attempt rate at 56.6%. When fraud in financial services did occur, it was most likely the result of first-party application fraud, which happens when an individual completes a fraudulent application(s) that contains intentionally inaccurate or manipulated information with the intention of receiving a lower rate or better terms for a policy or contract.

“This may be a common type of fraud due to the first party committing the act rather than having to go through more adverse types of fraud (e.g., stolen identity, synthetic),” noted Cohen.

Certain business sectors, however, were more prone to digital fraud attempts, with the logistics industry exhibiting the greatest YoY growth in the first quarter of 2022 (45.9%) – possibly reflecting fraudsters trying to take advantage of the continued challenges within that industry as retailers struggle to ship goods in a timely manner. The logistics industry’s main fraud attempts came as shipping fraud, which is when a buyer spoofs a shipping address or when a seller receives payment for goods or services, but never ships to the buyer. The gaming industry saw the second largest increase in the rate of suspected digital fraud in this year’s first quarter, growing 27.2% YoY.

“As fraud rates stabilize during a period when fraudsters are searching for new vulnerabilities, many organizations have shifted their focus to identifying more of the good customers and transactions to increase revenue and customer lifetime value. By reducing false positives, false declines, and manual review rates, organizations can dramatically improve the customer experience through trusted connections while still keeping the fraudsters at bay,” said Sean Donnelly, senior vice president and go-to-market global fraud solutions at TransUnion.

Cohen added, “Despite an overall decrease in fraud, companies should still be keeping their guard up to protect customers as well as their bottom line.” Cohen also suggested companies should always focus on providing a seamless customer experience. “Reducing false positives, false declines, and manual review rates can help organizations dramatically improve their trusted connections with customers while still keeping the fraudsters at bay.”

Source: TransUnion

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