Fraud is on the rise as more daily activities, such as employment, education, commerce, and entertainment, move online. A trio of new surveys portray a grim picture, raising concerns that businesses are losing more money to fraud and that the problem will worsen in the next year.
According to a poll of senior risk executives conducted by KPMG, 67 percent of respondents said their organizations had experienced external fraud in the previous 12 months, and 38 percent believe the risk of fraud perpetrated by external criminals will grow slightly in the coming year.
External fraud, which includes credit card fraud and identity theft, refers to incidents committed by someone outside the organization. For the majority of these respondents, fraud and cybercrime had a financial impact: 42% said their firms lost 0.5 percent to 1% of their revenue as a result of fraud and cybercrime.
According to Juniper Research, merchant losses due to online payment fraud would total $206 billion between 2021 and 20255.
In its fourth quarter “Fraud and Payments Report,” fraud and risk intelligence firm Outseer (spun off of RSA Security in June) claims that social-engineering approaches such as phishing messages, phony social media profiles, and fake mobile applications are effective for a speedy cash-out. Trojans, for example, are being used less frequently because they take more resources to maintain and monetize, according to Outseer.
Experian’s annual “Future of Fraud Forecast” states that as more people adopt a “digital-first approach to everything from shopping to dating to investing,” fraud becomes increasingly appealing to thieves. One area where fraud is on the rise is the buy now, pay later (BNPL) market, where clients make a purchase and receive it right away, but pay for it later, usually in installments.
Layaway plans aren’t new, but with the rise of internet shopping, more businesses have begun to offer them, and more financial services companies have added them to their offerings. According to Experian, there are 45 million active BNPL users who spend more than $20.8 billion.
According to Outseer’s analysis, PayPal’s BNPL service saw a 400 percent rise in usage on Black Friday compared to the previous year, and processed more than $1 billion in transactions in November.
Identity theft, in which criminals use stolen login credentials to access BNPL accounts and make purchases, and synthetic identity fraud, in which criminals blend genuine and fictitious information to construct an entirely new identity to create new BNPL accounts, will be on the rise for BNPL lenders.
Synthetic fraud takes use of the fact that BNPL lenders often have less severe identity verification standards, allowing new accounts to be created that are then utilized to scam businesses.
“As the sector moves into 2022, anti-fraud solutions that use machine learning, data science, and shared global intelligence could be critical for detecting and preventing BNPL fraud,” adds Outseer.
