A global snapshot of the fraud trends impacting consumers – and the tech that’s helping fight back this holiday period

There’s no beating around the bush – the issue of fraud is a growing problem, and one that is increasing at an alarming rate. The proliferation of payment channels and reliance on ecommerce have already given hackers the fast track to year-round fraud. Now, mixed with increasingly sophisticated AI, holiday festivities, and surges in purchases around major BFCM deals, the floodgates into fraudulent activity have been well and truly opened.

Putting a global issue into perspective
Fraud really is a global issue – no country, business, or industry is safe without the correct technology and security measures in place.

North America faces the largest fraudulent transaction value of any regional market, in fact the region accounted for 42% of global fraud by value in 2023. In Europe, Germany and France have experienced exceedingly high levels of ecommerce fraud, with France recording a 14% increase, and two out of every three online retailers in Germany identifying an increase in ecommerce fraud.

But perhaps most alarmingly, Juniper Research found that cumulative losses to online payment fraud globally between now and 2027 are expected to exceed $343 billion.

It’s clear that being proactive against fraud is no longer a choice!

Deals too good to be true – where PayTech needs to step up

Last week, we covered the role B2B can play in joining in on the BFCM antics and we’re not finished! Deloitte expects BCFM sales to increase 13% on 2022 sales, with 8 in 10 shoppers planning to make BFCM purchases – a figure I’m sure is only increasing as I type this on Black Friday!

Such a surge in retail purchases creates the perfect storm for payment fraud, and looking further afield, the holiday season stretches for much longer than just BFCM – and fraud remains prevalent throughout its entirety.

We’re certainly experiencing the end of cash as we know it, as we phase out physical money in exchange for a digital transactions. PayTech has to step up the plate to protect business and consumers alike – but how exactly? We are certainly now seeing payment authentication using touch and fingerprints, and voice recognition were growing in popularity – for example Google Pay and Apple Pay are good trailblazers for the day-to-day use of biometric authentication, where customers can use their face or fingerprint to access information, or authenticate a contactless payment. Like it or not, watch this space for more of the same.

AI goes head-to-head with itself to fight fraud

Yes. AI has become the double-edged sword for causing and fighting fraudulent crimes.

After ChatGPT exploded as the fastest-growing app of all time, hackers took this opportunity as their time to shine – and since have utilized generative AI and chatbots to scam businesses and consumers. In fact, a common tactic involves creating fake ChatGPT-related payment pages that are designed to steal victims’ money and credit card information – and now over 50 fake ChatGPT apps have been recorded.

It takes one to know one – AI takes the fight to AI-induced holiday fraud

Yes, AI-facilitated fraud techniques are making it progressively easier for hackers to commit fraud – but technologies such as AI and ML are hot on its heels to counter-attack. Over the festive season and in 2024, we will see the further development of intelligent systems that use AI, ML, and biometric verification to spot and stop fraud.

AI and ML algorithms can analyze vast amounts of data to check the legitimacy of a transaction and suspicious behavior. For example, is the transaction in an expected geography? Is the time and travel distance between their last transaction and this transaction reasonable? All data is fed into a fraud model to block or flag questionable transactions.

Big Brother is watching you – maybe this time we won’t mind?

Financial institutions are catching on! Using AI-powered insights, Mastercard in conjunction with nine other banks are helping banks predict fraud in real-time, even before money leaves a customer’s bank account. For the past five years, the AI-driven technology has been following the flow of scammed funds through mule accounts to identify and then close them down. Mastercard’s AI-powered cybersecurity solutions for instance, have stopped over $35 billion in fraud losses in the last three years.

IBA is privileged to be able to track the very latest developments

Some of our clients are at the forefront of the fight against fraud. One of our clients has rolled out an AI powered Speech Analytics and Conversational Intelligence for its contact center customers. Revolutionary software uses sentiment analysis to detect hesitancy in voices when making financial claims. For fraudsters, we’re all fair game, whether consumers or businesses, in any industry and in any geography. We all know that if a deal is too good to be true, then it probably is, but put a fraudster behind the sell and the story changes. One of our clients is involved in the fight against ghost broking, the shocking overselling of fraudulent insurance policies that leave families and individuals heartbroken. They are now at the forefront of championing a new “gold standard” for data provenance and helping build a cross-industry collaboration to create a long-term, strategic plan to combat the fraudsters.  

But, payment security can go one step further than AI and ML! For our client in the event-driven architecture space, fighting fraud and money laundering has been top of mind for some time in financial services and retail. AI and ML, aided by our client’s event driven architecture, can make rapid decisions and enable companies to flag abnormal transactions in real-time across all channels.

A lot is still to be done because the ball is still in the fraudsters court and the ball moves fast.

Keeping one step ahead of the fraudsters might still alude us but being faster than them is within our grasp. Tech is helping us all keep the  Ho Ho Ho in the Holiday season and beyond.

Georgia Harris is PR Lead Themes at IBA International.

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