Despite the many headlines and news reports highlighting individuals affected by scams, there have always remained a few lingering questions for me. Thus, I was very excited for the opportunity to partner with Javelin Strategy & Research a few months ago on a project focused on the journey of scam victims. The research delved into the complex world of scam victims, offering a deep dive into the anatomy of scams and the aftermath from the victim's perspective.
We recently hosted a webinar with Suzanne Sando, senior analyst in Javelin’s fraud and cybersecurity practice, to analyze the results of the study and suggest ways that financial institutions can use this data to improve the victim experience. Some of the key findings are revealed below.
Demographics and Misconceptions
One of the standout findings is that there is no typical scam victim. Contrary to popular belief, older adults are not the primary victims. Research shows that 66% of scam victims are aged 18 to 44, with only 17% being 55 or older. Similarly, affluent households (with an annual income of $150,000 or more) only make up 18% of scam victims, dispelling the notion that wealthier individuals are more frequently targeted.
Confidence vs. Reality
Despite high confidence in their ability to detect scams, nearly half of scam victims fall prey to scams repeatedly. An overwhelming 80% of victims believe they can identify a scam before being deceived again, yet almost 50% report being scammed more than once in the past two years.
Financial and Emotional Impact
Scam victims often act as their own first line of defense, with 64% discovering scams by reviewing their account statements. The financial toll of scams can be severe, with 39% losing more than $500 per incident and 22% losing between $1,000 and $5,000. Without guaranteed reimbursement, these losses can disrupt victims' financial stability, leading to overdraft fees and unpaid bills. Additionally, the emotional and psychological impacts are profound, particularly among older victims who may feel stigmatized and embarrassed.
The Role of Financial Institutions
Scams are a pervasive issue affecting a diverse range of victims. The financial and emotional impacts are substantial, and financial institutions play a crucial role in the aftermath of a scam.
Most scam victims (70%) report their experiences to their FI first, seeking assistance and reimbursement. Two out of three report receiving full reimbursement (54%) or partial reimbursement (13%). These figures are in line with what was reported by UK banks in 2023 under the voluntary reimbursement code. Timely resolution is also critical. One in four scam victims reported their case took less than a day to resolve while 34% of victims reported waiting a week or longer.
So, what steps can FIs take to improve detection and response? Some of the recommendations discussed included:
Review Provisional Credit and Reimbursement Policies
Offering provisional credit during scam investigations can alleviate victims' financial burdens, but this requires robust policies and accurate data to distinguish between legitimate scam losses and first-party fraud. Reassessing reimbursement policies to ensure they are clear and fair can enhance customer satisfaction and trust.
Find Ways to Improve Education and Alerts
Effective scam education is not one-size-fits-all. Tailoring educational content to specific demographics and transaction habits can significantly impact scam prevention. Additionally, avoiding notification fatigue by ensuring alerts are relevant and timely can help consumers recognize and act on suspicious activities more effectively.
Consider Real-Time Detection Technology
Integrating real-time detection technology into existing fraud prevention systems is vital. Monitoring account holder activity, using behavioral biometrics, and intervening when suspicious activities are detected can prevent scams before they result in financial loss.
Learn More
Explore the infographic below to see more key highlights from the research.
You can also download a full copy of the study, The Emotional Undercurrent of Financial Scams, or view the webinar replay.
