Credit fraud on the rise
With more consumers and businesses turning to credit to stay afloat in the turbulent economic environment, fraudsters look to exploit the situation.
According to the Q4 2023 TransUnion Consumer Pulse Survey, digital fraud and personal data security are major concerns for consumers, as 61% of respondents were targeted by fraud schemes in the prior three months, with 10% falling victim.
Based on survey insights, fraud schemes typically involve phishing, smishing (fraudulently soliciting information via SMS) and money/gift cards, highlighting the need for better data security measures and more secure digital environments.
The business sector also experienced a spike in fraud, with quarterly Debtsource credit application data showing a sharp increase in fraudulent activity from Q2 to Q3 2023, coupled with a significant increase in the value of fraudulent applications.
“Fraud is a pervasive business-to-business problem, with fraudsters employing various methods,” says Ann Buitendag, COO of Debtsource.
While hacking and cybersecurity breaches dominate global risk trends,
Buitendag says customer fraud is a major concern in SA, ranking as the second most perpetrated fraud type.
“This fraud encompasses various activities, such as false event details and credit application fraud. The accessibility and ease of perpetrating customer fraud in the digital age makes it an attractive option compared to traditional forms of robbery, leading to more data and credit application fraud cases.”
In Experian’s latest fraud report, research conducted by Forrester Consulting reveals that the two biggest challenges limiting fraud prevention among businesses are an inability to align fraud prevention and revenue growth strategies (59%) and the increased costs associated with using multiple types of fraud prevention software (59%).
“As businesses expand their fraud prevention capabilities with multiple fraud services, connecting them via a single platform and API become crucial,” says Mark Wells, Chief Customer Officer at Experian Africa.
The research findings affirm this need, with 65% of respondents stating that reducing the number of platforms across the business was their top fraud-related priority.
In addition, 56% of local respondents believe that AI and machine learning (ML)powered solutions will drive the future of fraud prevention by helping to increase acceptance rates, reduce losses through greater fraud detection accuracy and decrease the volume of manual reviews and false positives.
“Our survey results highlight how ML improves detection of both fraudsters and legitimate customers, enabling businesses to continuously and passively monitor customers without impacting the user experience, which is the key to balancing revenue growth with adequate fraud prevention,” says Wells.