Reported by Bill Lumley

Image: Getty Images

Banks are meeting their anti-fraud responsibilities by investing heavily in techniques to keep up with the fast-evolving practices of online fraudsters, but they are finding it hard to keep up with the rapidly evolving challenge.

This was a key finding of the authors of the 2023 Global Banking Fraud Index published by fraud prevention software company SEON this month. It found the costliest type of fraud recorded last year, cheque, card and bank account fraud, was more than three times as common as the second costliest type, online shopping and auctions fraud. The third costliest was application fraud, excluding mortgages.

The report shows that while digital-only banks facilitate financial inclusion for millions of customers who have been traditionally unable to open a bank account, fraudsters are finding new digital ways in which to exploit weaknesses.

It cites Brazil’s Nubank, the world’s largest neobank both by customer base and valuation, as one of the major players which is “showing consumers that financial services can be a right, rather than a privilege”. But it warns such digitisation means more “bad actors” are finding digital ways to get included. According to the report, 71% of fintechs surveyed reported that they had suffered a business email compromise (BEC) breach in the past year.

The prevalence of BEC as a “huge security flaw” is among key findings of the report, that include unique identity validation challenges offered by buy now, pay later agreements and scams that lead to automated push payment (APP) fraud.

The findings on the risks of APP fraud echo those of the UK’s Payment Systems Regulator (PSR), which revealed almost £500m was lost to such scans in the past year. The PSR says it expects to see more action from financial institutions to stop these scams occurring and to better protect people should they fall victim.

Meanwhile, according to banking trade association UK Finance, last year more than £1.2bn was stolen by criminals through authorised and unauthorised fraud in 2022, equivalent to more than £2300 every minute.

Read full report: https://www.thebanker.com/Banking-Regulation-Risk/Banks-must-raise-their-game-in-the-fight-against-fraud