The fight against fraud is a constantly mutating challenge. Latest findings from UK Finance revealed that more than £1.2billion was stolen through fraud last year – the equivalent of £2,230 a minute. But through a combination of technology, and increasingly sophisticated security measures businesses are fighting back.

How are businesses protecting themselves and their customers from the growing epidemic of fraud in 2023? Experian has just completed its annual survey of more than 2,000 UK consumers and 200 businesses to understand priorities and concerns when it comes to fraud. Here are four major themes we’ve uncovered from a businesses and consumer perspective.

The increasing fraud risk in 2023

Businesses are increasingly concerned about fraud risk, especially APP fraud, account takeover fraud and first-party fraud. More than two-thirds (69%) of businesses reported their fraud losses to be ‘significantly or somewhat more’ compared to the previous year.

More than half (53%) said they have a high level of concern about fraud, which is perhaps understandable when you can consider that Authorised Push Payment (APP) fraud losses reached £485 million in 2022 alone.

From the consumer perspective, most are concerned about identify theft (58%), followed by their credit card information being stolen (53%). Fake and phishing emails, false information, and crypto and romance scams – which all potentially fall under the category of APP fraud – are all strongly represented as pressing consumer concerns.

Both businesses and their customers are aligned when it comes to their concerns. For businesses, however, growing first-party fraud risks, and new UK legislation that makes institutions liable for losses associated with APP fraud, means fresh approaches will be required that support real-time transaction analysis and enhanced user authentication.

Machine Learning is no longer a ‘nice to have’ for fraud prevention

Much discussion in recent years has centred on the potential impact Machine Learning (ML) can have on fraud prevention. When it comes to detecting and preventing fraud, advanced analytics, like machine learning, is now a non-negotiable. Incorporating machine learning fraud models leads to a simplistic, more understandable referral strategy, which equates to fewer manual referrals, more straight through accepts and a reduction in false positives.

ML means large numbers of transactions and datasets can be analysed automatically, extending fraud prevention measures across an entire customer portfolio, ensuring that new and existing fraud risks can be identified quickly and at scale.

More than a third of businesses surveyed (35%) are looking to build ML capabilities into their fraud identification and prevention strategies, indicating that ML is now established in the space.

However, the survey also revealed that nearly half (49%) of businesses cited cost as the most significant barrier to ML adoption. This suggests that many still have to balance their ML plans with cost constraints. This is potentially worrying, particularly as traditional models are less adept of keeping pace with evolving fraud threats.

Business investment

Businesses are ramping up their fraud prevention investments in the face of this growing, evolving threat, indicating they understand the seriousness of the situation. Almost three-quarters of businesses are expecting increased budgets for fraud management for the next year. Of these, 79% are expecting increases of more than 8%, with 6% expecting increases of 20% or more.

Sophisticated security measures are also developing at pace, with established ones such as passwords and security questions no longer featuring in businesses’ future strategies.

41% of organisations are planning to invest in security measures that require customers to have a ‘device in hand’. Almost as many (34%), will also be investing in behavioural biometrics-type solutions that look at anomalies in customer behaviour, spending patterns and transaction histories to identify fraud.

Another key investment priority is physical biometrics, with a third of UK companies (33%) planning to add this kind of solution to their identity and fraud prevention strategies.

Consumers demands

Consumers now have high expectations of these security measures – and all businesses may not be keeping up to speed with them. The survey found that consumers most trusted security measures are physical biometrics (73%), behavioural biometrics (73%) and mobile pin codes (71%), but neither physical or behavioural biometrics are in the top five technologies knowingly encountered during online account opening. This could be due to the technology not being used, or because the journey is now so seamless that users aren’t noticing invisible layers of security.

This gap between consumer expectations and current authentication methods is having a significant impact on abandonment rates in new account opening processes. 48% of UK consumers have set up a new account in the last six months but a third (32%) have considered abandoning a journey due, for the most part, to the onerous nature of the information requested from them.

This demonstrates the scale of the challenges faced by businesses with their identity and fraud-prevention strategies. While some key priorities – such as physical biometrics – are in line with consumer demand, each organisation needs to review its strategy to ensure that investments in new solutions can minimise abandonment rates whilst at the same time achieving their fraud prevention targets.

The maturing of new technologies – and the comfortableness of consumers with sophisticated security measures – means businesses are increasingly equipped to identify and prevent fraud, but must do what they can to ensure their prevention systems are fit for purpose to meet new and emerging threats.