The UK fraud epidemic shows no signs of slowing down. Consumers have never been more vulnerable to scams and fraud attacks, as criminals look to take advantage and exploit people’s personal information and worries.

Consumers must be equipped with the necessary knowledge to stay vigilant of the potential impact of growing fraud and new identity threats. Here are six trends that we expect to see develop in the UK over the course of 2023.

Authorised Push Payment (APP) Fraud

Authorised Push Payment (or APP) Fraud is a scam involving a fraudster tricking victims into willingly making authorised bank transfers to them.

Research from UK Finance shows that APP fraud was up 30% in the first half of 2022 compared to the same period in 2021. As the cost-of-living crisis persists, we expect to see APP fraud accelerate significantly this year, with fraudsters finding new ways to defraud their victims with fake emails, websites, and social media posts. Stressed consumers are, of course, more vulnerable with promises of easy return on their “investments” as well.

Within the APP landscape, certain types of fraud are growing especially rapidly. Losses related to romance scams, for example, are up by 31% for the first half of 2022 compared to the same period last year, while ‘purchase scams’ – where consumers are conned into paying for goods they believe to be genuine – are happening with greater frequency than ever, accounting for 56% of all APP scams.

Crypto and investment related scams are also driving further increases in APP fraud as people seek to cover some of the extended cost of living and look to use alternative income sources to settle credit being used to bridge the gap in their income.

As APP fraud is set to boom in 2023, new legislation from the UK’s Payment Systems Regulator seeks to make both paying and receiving banks responsible for related losses. With the risk of higher losses creeping onto banks’ balance sheets, Experian expects to see major investments in solutions that detect and prevent potentially fraudulent customers and transactions based on rich data and real-time analytics.

Utility Scams

Consumers’ concerns about energy costs are making them particularly vulnerable to ‘utilities’ scams. As a result, it is likely there will be a rapid increase in this kind of fraud throughout 2023.

We are seeing fraudsters targeting consumers with fake messages about how they can save money on their bills, encouraging them to make payments and give up their Personally Identifiable Information (PII), which can then be used to take out credit in their name.

To mitigate the growing risk, it’s important that businesses and organisations are making the conscious effort to educate customers about genuine communications and how they can identify attempted fraud.

In addition to these activities, utilities companies continue to invest in data-driven identity solutions that validate new client onboarding requests, and to verify that existing clients are genuine customers. These kinds of technologies help to ensure that customer transactions are genuine and that no one is accessing utilities or interacting with the organisation under false pretences.

Cluster Fraud

Fraudsters now have access to a wealth of rich PII about consumers, from social media platforms where people overshare their information without realising it could be used by criminals, to stolen data bought from the dark web. The availability of this information is now enabling fraudsters to mount multi-dimensional attacks – ‘cluster fraud’ – which sees a victim targeted with a number of different scams all at once.

For example, during this kind of scheme, a fraudster may pose as a professional, personal or romantic contact and use the same set of data to present a victim with a ‘too good to be true’ crypto investment. At the same time, the victim can be targeted with a dating scam, a utility scam or fake communications from a bank or other financial institution.

Research from Experian shows that losses from the fraud elements of these kinds of schemes are growing rapidly. Losses from scams involving fake trading platforms, for example, have increased by 19% in the last 12 months. At the same time, losses related to crypto scams are up by around 50%, and this figure is expected to increase by a further 30% to 40% during 2023.

First Party Fraud 

As a growing number of UK consumers find themselves in financial difficulty due to the economic climate, we expect to see a rise in 1st party mortgage, credit, and loan fraud over the next 12 months.

Some consumers may be tempted to give a misleading or incomplete view of their financial situation for a number of reasons, whether they need to re-mortgage their home to meet their obligations, wish to consolidate credit card debts with a personal loan, or to fulfil their ambitions to move into a larger property. 

To protect their businesses and customers, institutions need solutions that support real-time, granular analysis of customers’ income and outgoings to identify material inaccuracies in consumer and business credit applications. These kinds of solutions can help to reduce the negative impacts of 1st-party fraud.

The ability to understand changing fraud risks across the portfolio a critical requirement for businesses so that first-party fraud, mule accounts and other types of fraud can be identified and addressed on an ongoing basis to minimise risk and losses.

Digital Identity

The Government believes that Digital ID solutions will unlock improved user experience in the digital world, increase security, and boost economic growth. Digital IDs will play an even greater role in online authentication – but they must be protected. 

Under the UK Government’s ‘Trust Framework’, consumers need to demonstrate their eligibility to work, rent and access a wide range of government services. At the same time, the number of online sites and services that require authentication – either for onboarding or purchasing certain goods and services – continues to increase.

To meet the need for accurate, seamless online identity and authentication, we are seeing rapid growth in reusable digital IDs – both for accessing private and public sector services and for meeting due diligence requirements around eligibility.

But because the process of creating reusable digital identities is still relatively new for consumers, there is still some level of uncertainty around it. Many consumers, for example, will create reusable IDs to demonstrate their eligibility to work or rent in the UK, possibly without realising that the process was far more than a one-time verification.

We anticipate a growth in creation of digital IDs throughout 2023, across both public and private sectors. However, it’s important ensure that an appropriate cybersecurity framework exists to protect them. If not properly looked after and secured, these digital identities – which are not directly owned by consumers – could potentially create attack surfaces and vectors that can be exploited by fraudsters.

Instant Credit Issuing

Previously, credit card applications typically took days, if not weeks, to approve or reject giving institutions an opportunity to conduct in-depth customer checks. However, a new generation of credit products where customers receive near-instant access to funds, require real-time decisioning to minimise fraud risks.  

The leading retailers advise consumers to make one or more small purchases with their new credit line before buying expensive items such as phones or tablets. At the same time, retailers and other service providers are implementing data-driven solutions that can check customers’ identity and credit worthiness in real time, helping them to deliver credit at a faster pace. Providers must ensure their fraud prevention systems are robust enough to deal with this.

A comprehensive and holistic view is needed to ensure compliance and minimise potential risks associated with instant credit issuing. A full view of risk in this context includes an appropriate balance between rapid onboarding processes and appropriate strong authentication checks and compliance with know your customer (KYC) requirements. These kinds of checks and balances need to be applied across all kinds of ‘instant credit’ products, including BNPL and virtual credit cards.