Consumers and businesses are facing numerous threats as fraudsters deploy new and sophisticated scams to part people from their digital identity and money. 

2022 has so far proved to be a happy hunting ground for UK fraudsters – credit card fraud, scams, and ease of access methods are creating a perfect storm for fraudsters.

What trends have emerged since the start of the year and how can these new threats be mitigated by both businesses and their customers?

Credit Card Application Fraud

Credit card application fraud rose by 18% in the first three months of this year, according to Experian figures, just below the record five-year high it reached in the last quarter of 2021.

When looking at the type of victims, those aged between 50-59 with higher incomes and higher borrowing power were the most likely to be targeted, along with younger families aged 40-44 who are also financially secure.

Almost three-quarters of cases detected involved the fraudster using the victims’ current address to apply for credit, highlighting the importance of people doing what they can to keep their personal information safe and secure, especially when using online apps and social media.

The cost to consumers is eye-watering. According to recent research from the Social Market Foundation there are now 134 cases per 1,000 people in the UK, with victims losing an average of £8,833.20.

Authorised Push Payment Fraud and messaging scams

Authorised Push Payment (APP), better known as bank transfer fraud, is a significant issue. Figures from UK Finance reveal that APP fraud cases rose by 40% between 2020 and 2021 accounting for £580million worth of losses, with the body describing the UK as suffering from an ‘epidemic’ of fraud.

Much APP fraud is instigated via Whatsapp, email and text messaging, ranging from the simple to the sophisticated. Recent scams include duping parents by impersonating their children, claiming they are in trouble and need to have money transferred. Cryptocurrency and romance scams, increasingly common across 2022, are also built on victims transferring money from their own accounts.

The rise in the cost of living is also proving an issue to exploit. Scammers claiming to be from energy companies are contacting would-be victims and conning them into handing over their personal information on the premise of a ‘refund’ or claiming they are in arrears has become prevalent. Victims paying for goods – which then never arrive – via bank transfer is also increasingly common.

As it’s the consumer making the payment directly, it can be difficult to see how businesses can help solve this issue. The best route is through new and sophisticated authentication methods – such as behavioural biometrics – to help identify payments which are out of the ordinary and flag for further investigation.

The new digital consumer and new ways of authentication

In recent research, Experian found that 41% of consumers said they value online security above all else. But 92% said it was important they are recognised quickly if they are an existing or repeat customer, with authentication easier compared to first-time onboarding.

Fortunately, consumers are now trusting advanced authentication technologies and expecting the businesses they use to have moved beyond traditional passwords. Pin codes and physical and behavioural biometrics are all now preferred methods of authentication.

As people become more attuned to the threat of fraud, more businesses will begin to explore and deploy advanced authentication technologies, providing reassurance to both the customer and the business itself.

First Party Fraud

At times of economic stress first-party fraud – where a person misrepresents their identity or gives false information on an application – tends to rise. Examples include exaggerating their income or misrepresenting their financial circumstances to access borrowing they otherwise may not have been accepted for.

Change in circumstances leads to changing behaviour. Experian data shows there has been a 39% increase in first party loan fraud and a 17% increase in card fraud in the first six months of 2022 when compared to the whole of 2021. With the growth inflation ongoing, it’s likely this trend will remain into 2023.

This type of fraud is a risk to business, and organisations must be able to identify it. Regularly checking already opened accounts offers the chance to identify new information which could have flagged fraudulent activity at the point of application.

Security responsibility

The fraud landscape is increasingly complex. New technologies are vital for security and many businesses are already investing to ensure their prevention systems are as robust as possible.

Interestingly, Experian found nearly two-thirds (64%) of consumers expect businesses to take the necessary security steps to protect them, while 69% of businesses say customers should be doing more to protect themselves online.

Ultimately, it’s both parties’ responsibility. By doing all they can to protect their personal information, individuals can minimise the risk of becoming a victim and by deploying new prevention and authentication technologies, businesses can ensure that prospective customers are genuine.

There is no one-size-fits-all approach. Each businesses has its own requirements, to reflect its own appetite to risk when authenticating new and existing customers. A layered holistic approach, using both passive and active authentication methods, will give businesses the best chance of meeting the challenge of the UK’s ongoing fraud problem.