Fraudsters thrive on confusion and fear. We saw this unfold during the peak of the COVID-19 pandemic. As financial institutions scrambled to adjust to supporting a remote workforce, customers were also adjusting to moving more business online. In fact, financial institutions saw a 250% increase in digital channel usage on average, noted Julie Conroy, Research Director at Aite Group, in a recent webinar. “This wasn’t just existing customers, but we also saw a lot of net new users come into the fore.”
One major concern that has emerged during the pandemic is new account fraud, spanning not only a surge in lending fraud and card-not-present fraud, but the rise of mule account creation. In fact, one in five financial institutions cite new account fraud as the top incremental attack they expect to see resulting from the pandemic and global economic stimulus programs.
Elaborate mule recruitment schemes are already starting to flourish as fraudsters look to take advantage of a growing population of financially distressed consumers. Critical to the cash out process and the overall cybercrime lifecycle, financial institutions recognize that mule account detection is a top priority for them, although about one in three feel they don’t have the necessary resources to control it, according to Aite Group. Conroy noted, “Before the pandemic, we were seeing a lot of banks spending time addressing better detection of mules.” She added, “The uptick in mule recruitment will increase the importance of mule detection for a lot of institutions.”
Financial institutions have already started to adjust their fraud forecasts for 2020. Sixty-six percent, or two out of every three financial institutions, stated they have increased their expected fraud forecast in light of current events. This also comes at a time when they are re-evaluating their digital technology investments. For example, some institutions have started to evaluate whether to renew leases on expensive floor space in expectation of supporting a remote workforce long-term, including fraud and security operations teams. Investments that have been on the “wish list” to protect digital channels, automate processes and reduce response and resolution times are suddenly jumping to the top of the priority list.
With more investment in digital channels, what are the required capabilities to make the transition to a digital-first customer base successful? While enhancing fraud detection and reducing false declines are important, customer experience will be the key to attracting and retaining customers. Ayelet Biger-Levin, VP of Market Strategy at BioCatch, also speaking on the webinar noted, “We always talk about the need for a frictionless experience when it comes to digital. The reality is we are still often treating customers like criminals, making them jump through hoops and fill out endless forms.”
To create the appropriate level of protection in digital channels, the industry needs to move in a different direction. “We need to move beyond point solutions that solve a specific problem and look at technologies that can distinguish between genuine and fraudulent activity regardless of the attack vector,” added Biger-Levin.
What fraud threat do you think will end up having the most impact on financial institutions in 2020? Do you think current digital strategies are adequate to support customers and the need to protect them? How are fraud and security operations teams adjusting to working in virtual environments?
Get answers to these questions and more in a new research report, “Workplace Distancing: Adapting Fraud and AML Operations to COVID-19” by Aite Group and sponsored by BioCatch.