By Jason Lane-Sellers, director, fraud and identity, EMEA at LexisNexis Risk Solutions
As the Director of Fraud and Identity for EMEA at LexisNexis Risk Solutions, I have witnessed the evolving landscape of fraud and the increasing sophistication of fraudsters.
Recently, I had the opportunity to discuss our latest findings with Tony from Cover magazine, shedding light on the current state of fraud, particularly in the financial and retail e-commerce sectors.
Fraud remains a significant challenge, especially within the financial services industry. The complexities of fraud and identity theft can be overwhelming, leaving many unsure where to begin in tackling this pervasive issue. At LexisNexis Risk Solutions, we strive to analyse and assist our customers in the marketplace for fraud and identity solutions. Part of our remit involves an annual survey that examines the true cost and impact of fraud across various organisations.
Our latest report reveals the profound impact of digitisation on organisations. While digitisation brings numerous benefits, it also introduces new vulnerabilities. Traditionally, losses were more prevalent in the physical and operational aspects of businesses. However, our findings indicate that digital channels now account for 52% of actual fraud, marking a significant increase over the past year. This shift highlights the need for organisations to adapt their strategies to address the growing threat from digital fraud.
Digital fraud is not only faster and more comprehensive but also affects a broader range of end-users. The impact extends beyond financial losses, significantly affecting customer experience and satisfaction. Over 70% of fraud incidents negatively impact customer satisfaction and conversion rates. Moreover, managing fraud entails more than just addressing the immediate financial loss. Organisations must also contend with regulatory penalties, liabilities, and the costs associated with managing and investigating fraud events.
The financial services sector, including insurance, banking, fintech, and investments, faces unique challenges. Regulatory and governmental controls are stricter, resulting in higher costs for managing and mitigating fraud risks. In contrast, retail and e-commerce operations, while also targeted, do not have the same level of regulatory scrutiny. This discrepancy necessitates tailored approaches to fraud prevention and management across different sectors.
One notable trend we observed is the rise of scams targeting end consumers rather than corporations directly. Fraudsters are increasingly manipulating consumers to gain access to valuable data, making it difficult for organisations to differentiate between genuine and fraudulent activities. Account takeover and manipulation have become prevalent, with fraudsters leveraging compromised data from various sources to validate their identities and deceive victims.
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The insurance industry is especially vulnerable to scams and identity manipulation. Fraudsters exploit various channels, including claims processing, to perpetrate fake claims for damages, property, car insurance, and even travel-related claims. This broad spectrum of fraudulent activities underscores the need for comprehensive fraud prevention measures tailored to the specific vulnerabilities of each sector.
To combat this growing threat, organisations must adopt proactive and innovative approaches. Utilising technologies like behavioural intelligence and digital identity verification can help authenticate users without compromising the customer experience. These tools analyse user behavior, such as typing patterns and screen interactions, to validate identities, reducing reliance on traditional methods like passwords and one-time passwords (OTPs).
Furthermore, collaboration within and across industries is crucial. Sharing data and insights between financial services, insurance, banking, and other sectors can help identify and mitigate fraud patterns more effectively. Fraudsters operate globally, targeting organisations irrespective of their industry, making cross-industry cooperation essential in the fight against fraud.
Ultimately, the burden of combating fraud cannot rest solely on consumers or organisations. It requires a collective effort, combining technological advancements, regulatory compliance, and consumer education. As we navigate this digital landscape, it is imperative to protect our customers and their data, recognising that data is the new currency.
By implementing effective fraud controls and fostering industry-wide collaboration, we can stay one step ahead of fraudsters and safeguard the integrity of our digital economy.
Find the full LexisNexis Risk Solutions’ new True Cost of Fraud – Europe, Middle East and Africa study HERE